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ESRS S3 – Affected communities

ESRS S3 – Affected communities


ESRS S3 – Affected communities

The ESRS S3 is the third of four social standards of the European Sustainability Reporting Standards. The standards were developed by EFRAG and are to be applied in accordance with the CSRD. This article is based on the final delegated act of the ESRS, which was published on December 22nd 2023.

What is the ESRS S3 about?

ESRS S3 is intended to specify the information to be disclosed regarding the material positive and negative actual or potential impacts, risks and opportunities on affected communities. Companies shall explain their approach to identify and manage these impacts on affected communities, taking into consideration the rights of indigenous peoples. Furthermore, companies should explain how such impacts, as well as dependencies on affected communities, can result in material risks or opportunities for the company. The standard should also set out the financial effects on the undertaking in the short-, medium- and long-term. In addition, the standard includes characteristics and various indicators relating to affected communities.

Interactions with other ESRS

The ESRS S3 standard is to be applied with consideration of the ESRS 1 and ESRS 2 standards. In addition, the other social standards – ESRS S1, S2 and S4 – should also be applied.

ESRS S3 Disclosure requirements

Undertakings must apply the disclosure requirements of this standard if material impacts on, or material risks and opportunities related to affected communities have been identified through the materiality assessment.

The table below provides an overview of the disclosure requirements of this standard:


Disclosure requirement




Interests and views of stakeholders



Material impacts, risks and opportunities and their interaction with strategy and business model



Policies related to affected communities



Processes for engaging with affected communities about impacts



Processes to remmediate negative impacts and channels for affected communities to raise concerns



Taking action on material impacts on affected communities, and approaches to managing material risks and pursuing material opportunities related to affected communities, and effectiveness of those actions



Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

Ad 1) Interests and views of stakeholders

The undertaking should disclose how the interests, views and rights of significantly affected communities, including human rights, influence its strategy and business model.

Ad 2) Material impacts, risks and opportunities and their interaction with strategy and business model

ESRS 2 SBM-3 requires undertakings to disclose, whether and how actual and potential impacts on the affected communities arise as a result of the strategy and business model and how these impacts contribute to adapting the strategy and business model. Furthermore, the relationship between strategy and business model and material risks and opportunities resulting from impacts and dependencies on the affected communities should be disclosed.

Moreover undertakings must disclose whether they have included all affected communities that could be materially impacted by their own operations or a business relationship in the value chain. The undertaking must describe the type of affected communities and, in the case of negative impacts, whether these impacts are widespread or systemic, or whether they relate to individual cases or specific business relationships.

Ad 3) Policies related to affected communities

The undertaking should report on its policies and strategies for managing the material impacts on affected communities and associated material risks and opportunities.

Ad 4) Process for engaging with affected communities about impacts

In this context, the company should describe the general processes and procedures for engaging with affected communities and their representatives regarding actual and potential material impacts on affected communities. If the affected communities are indigenous peoples, the company must also explain how it considers and safeguards their rights in stakeholder engagement.

Ad 5) Process to remediate negative impacts and channels to raise concerns

The undertaking must describe the process for remediating negative impacts on affected communities that the undertaking has caused or contributed to. Furthermore, the undertaking must report on the processes available to the affected communities to raise concerns.

Ad 6) Taking action on material impacts

S3-4 requires undertakings to disclose their actions and initiatives to address significant negative and positive impacts, mitigate significant risks and pursue significant opportunities in relation to the affected communities, as well as the effectiveness of these actions.

Ad 7) Targets related impacts, risks and opportunities

The undertaking shall disclose time-bound and outcome-oriented targets for reducing negative impacts and advancing positive impacts on affected communities as well as for managing risks and opportunities related to affected communities.

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