ESRS S3 Affected Communities

ESRS S3 „Affected Communities" is one of the four social European Sustainability Reporting Standards that are mandatory under the Corporate Sustainability Reporting Directive (CSRD). The standard requires companies to disclose how their operations and value chain – including upstream and downstream business relationships – affect local communities. It captures both actual and potential, positive and negative impacts on people affected by the company's activities or business relationships, such as residents living near production sites, indigenous peoples or communities located at raw-material sources.

In terms of content, ESRS S3 organises the reportable topics into three sub-categories: the communities' economic, social and cultural rights (e.g. adequate housing, food security, access to water and sanitation, and impacts on land rights), their civil and political rights (e.g. freedom of expression, freedom of assembly, the protection of human-rights defenders) and the rights of indigenous peoples (in particular the right to free, prior and informed consent, FPIC). Companies must describe their policies, their processes for engaging affected communities, their remediation mechanisms and grievance channels, as well as concrete actions and targets.

Whether and to what extent ESRS S3 must be reported follows from the double materiality assessment: only material impacts, risks and opportunities trigger a reporting obligation for the relevant data points. ESRS S3 is closely linked to the human-rights due-diligence obligations under the German Supply Chain Due Diligence Act (LkSG) and the EU Corporate Sustainability Due Diligence Directive (CSDDD). The disclosure creates transparency about how a company respects land rights, avoids displacement, limits environmental impacts on livelihoods, and identifies, prevents and remedies adverse human-rights consequences for affected communities.