ESRS social standards explained: S1, S2, S3 and S4

ESRS S1 to S4 are the 4 social standards used to report how a company affects people. They cover the company’s own workforce, workers in the value chain, affected communities, and consumers and end-users. Reporting against all 4 isn’t automatic. Your double materiality assessment decides which groups, impacts, risks and opportunities are material, and therefore which ones you disclose.

Together they form the framework for identifying and reporting material social impacts, risks and opportunities across every material group a business touches.

This guide reflects the revised ESRS Delegated Act adopted by the European Commission on 3 July 2026. The revised standards are intended to apply to financial years beginning on or after 1 January 2027, following the scrutiny process. Companies reporting for 2026 have transitional choices and reliefs. The EFRAG Knowledge Hub publishes the revised standard texts and supporting guidance as they are finalised.

What are the ESRS social standards?

The ESRS social standards sit within the broader Corporate Sustainability Reporting Directive (CSRD) framework, alongside the environmental and governance standards. They bring people into sustainability reporting with the same rigour companies have long applied to climate and financial risk.

Together, S1 to S4 cover every group a business may affect: the people it employs, the workers in its supply chain, the communities near its operations or sourcing, and the people who use its products and services. Relevance varies by company, and the double materiality assessment settles it by asking 2 questions. Does the company have a serious impact on people? And do social issues create material financial risks or opportunities for the business?

One point that is easy to miss: human rights can be material under any of the 4 standards, depending on who your activities affect. A workforce issue, a community displacement, a product that harms vulnerable users, each can carry human rights implications. We have set out the broader picture in our article on human rights under CSRD.

The practical starting point is a question about people: who does our business affect, and how? The answer determines which standards are in scope.

ESRS S1: Own workforce

ESRS S1 covers the people a company directly employs or effectively controls: employees, certain self-employed workers, agency workers and contractors.

Most companies start here, because the data is closest to hand. That proximity can create a false sense of completeness, where S1 gets treated as the only standard that matters because it is the easiest to measure.

What S1 typically covers

Common material topics under S1 include:

• Working conditions (including work-life balance and adequate wages)

• Health and safety

• Equal treatment, diversity and inclusion

• Social dialogue, freedom of association and collective bargaining

• Training, skills and career development

• Human rights incidents

Materiality decides which of these need disclosing. A company with a large, dispersed workforce in physically demanding roles will probably find health and safety material. A professional services firm may land on skills development or pay equity instead.

What credible S1 reporting looks like

If an issue is material, you need to show who is accountable, what policy or process is in place, what actions you are taking and what evidence demonstrates progress.

A company that identifies workplace safety as material should be able to connect its risk assessment to governance, preventative actions, safety targets and relevant incident data.

The same logic applies across every material S1 topic. A disclosure that states a policy exists, without connecting it to action or outcome, will not read as credible.

ESRS S2: Workers in the value chain

ESRS S2 covers workers who are not employed by the company but may be affected through its value chain: supplier, subcontractor and business-partner workers.

S2 is often the hardest social standard to handle well, for 3 reasons:

• The people affected may sit several tiers away in the supply chain, with no direct employment relationship.

• The company may have limited operational control over third-party working conditions while still carrying real impacts and reputational or regulatory risk.

• A supplier code of conduct proves very little about working conditions on the ground.

Typical material issues under S2

• Forced labour and child labour

• Pay, working hours and recruitment fees

• Workplace safety

• Migrant-worker vulnerability

• Freedom of association

• Temporary, contract and informal work arrangements

These risks are sharpest in sectors with long, complex supply chains: food and agriculture, garments, electronics, construction materials and extractives. Sectors outside that list still need to pay attention. Any company sourcing goods or services from regions where labour protections are weak should assess S2 carefully. The UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct both set out the due diligence expectations behind the S2 framework.

What S2 asks for

S2 asks about the company’s relationship to the workers in its value chain. Compliance paperwork is the thinnest possible answer to that.

That has practical consequences. Understanding conditions takes more than annual audits and self-assessment questionnaires: direct engagement with workers, and credible data on pay and hours that reaches past tier 1 suppliers.

The revised ESRS also limits how much sustainability information you can request from smaller value-chain partners, though the duty to assess material impacts and report them stays. You need proportionate ways to gather evidence without loading unreasonable burdens onto smaller partners.

ESRS S3: Affected communities

ESRS S3 covers people and communities affected by a company’s operations or value chain, even where they are not workers, suppliers or customers.

When S3 is likely to be material

S3 becomes relevant when business activity creates impacts on people in the places where you operate or source. Common triggers:

• Industrial sites, extraction and manufacturing with local environmental or safety footprints

• Infrastructure, energy and construction projects

• Sourcing connected to land, water or local livelihoods

• Operations that affect public health, safety or security

• Projects affecting indigenous peoples or other vulnerable groups

What S3 typically covers

Material topics under S3 may include:

• Land rights and displacement

• Community health and safety

• Livelihood impacts

• Indigenous peoples’ rights

S3 reaches well past mining, energy and construction. Any business with a physical footprint, a complex sourcing model or products that alter local conditions should check whether communities are affected.

A food and beverage company sourcing from water-stressed regions faces potential S3 materiality. So does a logistics business running large distribution hubs near residential areas, and a fashion brand tied to garment-producing communities. The test is whether your activities create serious impacts on people who have no commercial relationship with you at all.

Grievance mechanisms matter here. S3 asks whether communities have a credible route to raise concerns, and whether those concerns get acted on. A mechanism that formally exists and does nothing will not survive scrutiny.

ESRS S4: Consumers and end-users

ESRS S4 covers the people who buy, use or are affected by a company’s products and services.

S4 is most obviously relevant to consumer goods, financial services, technology, healthcare, telecoms and digital platforms. It can apply anywhere products or services create serious impacts on the people using them.

Common material topics under S4

• Product safety and quality

• Accessibility

• Data protection and privacy

• Responsible marketing and information

• Risks to children and vulnerable groups

• Digital rights, algorithmic discrimination and user wellbeing

The digital side of S4 is growing fast. As companies deploy AI-driven products and services, algorithmic bias, user autonomy and data use are becoming live materiality questions. We have covered this in more detail in our article on how companies are impacting people through AI.

Sector relevance

S4 materiality varies widely. A financial services company may find its heaviest consumer impacts sit in mis-selling, access to credit or financial exclusion. A digital platform may face material issues around user data, addictive design or harm to younger users.

For a technology business, S4 may be more material than S2 if privacy, accessibility or algorithmic bias creates the company’s largest impact on people.

The principle holds across the standards: follow the impact. A business that has never examined its consumer impacts through a materiality lens may find S4 weighs more heavily than expected.

How do companies decide which ESRS social standards are material?

Materiality decides whether you report on a topical standard. You can conclude that one or more social standards are not material to your business, provided the rationale is documented and defensible. A blanket assumption will not do.

The assessment has to consider impacts, risks and opportunities linked to both your own operations and your value chain. It can be a simple process, as long as it is evidence-based.

A practical 4-step approach

1. Map affected groups across operations, value chains, communities and product users.

2. Identify actual and potential impacts using business model, sector, location and stakeholder evidence.

3. Engage the people who can reveal conditions that internal data misses: workers, community representatives, customers, civil society.

4. Assess severity and likelihood. 

5. Document the materiality decision and connect material topics to disclosure.

Start with who the business affects, then let the evidence set the reporting boundary. Ease of measurement is a poor reason to stop at S1.

This is a common failure mode in early CSRD assessments. Companies default to workforce data because it is readily available, then treat the other standards as lower priority without evidence to support that. An undocumented assumption that S2, S3 or S4 are non-material is not a materiality assessment.

For a deeper look at assessing human rights impacts across workers, communities and end-users, read our guide to human rights in a double materiality assessment.

What does good reporting across S1 to S4 look like?

Strong disclosure follows the same logic whichever standard is in scope. It draws a visible line between 5 things:

1. The group affected: who is impacted, and how you identified them.

2. The impact, risk or opportunity: what the materiality assessment found.

3. The governance or policy response: who is accountable, and what framework guides the approach.

4. The action taken: what the company is doing about it.

5. The target, metric or evidence of progress: how you know whether conditions are improving.

If value-chain worker safety is material, a credible disclosure explains where the risk sits, how you identified it, who is accountable, what you changed, and how you measure whether conditions are improving.

The same structure applies to a workforce pay equity issue, a community land-rights concern or a consumer privacy risk. The group and the topic change; the logic does not.

Disclosures that skip steps leave the chain broken. A policy with no action attached, or a metric with no explanation of what it measures, reads as incomplete. Auditors and stakeholders are looking for the whole chain of evidence.

ESRS S1 to S4: the practical difference

The most common confusion is treating the 4 standards as overlapping categories when they are distinct reporting boundaries. It gets clearer once the focus shifts to who is affected.

The boundary is set by the relationship between the company and the person affected. Where an issue happens to be discovered has no bearing on it.

A health and safety problem found during a supplier audit is an S2 issue, because the workers affected are not employed by the reporting company. A data breach that harms customers is an S4 issue, even where the root cause was an internal process failure. Follow the person, and the reporting boundary stays clear.

What companies should do next

If you are preparing or updating a Sustainability Statement, the social standards are a practical way to check whether your existing people-related work maps to the right reporting boundaries.

1. Check whether your double materiality assessment looks beyond the direct workforce.

2. Map existing people-related risks and impacts to S1 to S4, so you can see what is missing from scope.

3. Find the thin spots in your evidence, particularly in the value chain and among affected communities.

4. Define clear owners for each material social topic.

5. Build disclosures that connect materiality findings, governance, action and measurable evidence.
   
   

How Kōan can help:

The social standards ask for evidence most companies don't collect by default: conditions inside a supplier's factory, or how a product affects the people using it. Getting S1 to S4 right takes sustainability expertise and a clear read on what the revised ESRS requires. That's what our end-to-end reporting services are built for.

We work with companies to turn that into clear, defensible reporting decisions. For the social standards, we can support:

• CSRD and ESRS S1 to S4 interpretation and scoping.

• Double materiality assessment across own workforce, value chain, communities and consumers.

• Stakeholder and worker engagement design.

• Data collection, KPIs and targets for material social topics.

• Drafting the social disclosures for your Sustainability Statement.

• Preparing for external assurance, and communicating with boards and finance teams.

If you're working through your social materiality or want a second opinion on an existing assessment, get in touch, we're happy to discuss where you are in the process.