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Own Workforce

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Shel

This standard specifies disclosure requirements that help users of the sustainability statement to understand the company’s material impacts on its own workforce, as well as related material risks and opportunities. These includes:

  1. how the company affects its own workforce, in terms of material positive and negative actual or potential impacts;

  2. any actions taken, and the result of such actions, to prevent, mitigate or remediate actual or potential negative impacts, and to address risks and opportunities;

  3. the nature, type and extent of the company’s material risks and opportunities related to its impacts and dependencies on its own workforce, and how the company manages them; and

  4. the financial effects on the company over the short-, medium-, and long-term of material risks and opportunities arising from the company’s impacts and dependencies on its own workforce.

In order to meet its objective, this standard also requires an explanation of the general approach the company takes to identify and manage any material actual and potential impacts on its own workforce in relation to the following social factors:

  1. Working conditions. This includes:

    1. secure employment;
    2. working time;
    3. adequate wages;
    4. social dialogue;
    5. freedom of association, the existence of works councils and the information, consultation and participation rights of workers;
    6. collective bargaining, including the rate of company’s workforce covered by collective agreements;
    7. work-life balance; and
    8. health and safety.

  2. Equal treatment and opportunities for all, including:

    1. gender equality and equal pay for work of equal value;
    2. training and skills development;
    3. employment and inclusion of persons with disabilities;
    4. measures against violence and harassment in the workplace; and
    5. diversity.

  3. Other work-related rights, including those that relate to:

    1. child labour;
    2. forced labour;
    3. adequate housing; and
    4. privacy.

In addition to the issues listed above, the company may also consider disclosing information about other issues that are relevant to a material impact over a shorter period of time. For example, this could include initiatives related to the health and safety of its workforce during a pandemic.

The overview of social matters provided above does not suggest that all of these issues need to be reported on in each disclosure requirement of this standard. Instead, they serve as a list of matters derived from the sustainability reporting requirements in Directive 2013/34/EU. The company should consider these matters for the ESRS 2 materiality assessment related to its own workforce and, where relevant, report them as material IROs within the scope of this standard.

This standard also requires an explanation of how such impacts, as well as the company’s reliance on its own workforce, can create significant risks or opportunities for the company. For example, in the case of equal opportunities, discrimination in hiring and promotion against women can limit the company’s access to qualified workers and damage its reputation. On the other hand, policies aimed at increasing the representation of women in the workforce and in higher management levels can have positive effects, such as expanding the pool of qualified workers and enhancing the company’s reputation.

This standard covers a company’s own workforce, which includes both employees (people who have an employment relationship with the company) and non-employees who either have contracts with the company to supply labor (“self-employed people”) or are provided by companies mainly engaged in “employment activities”.

Examples of people that fall within the scope of this standard are:

  1. contractors (self-employed persons) in the company’s own workforce, including:

    1. contractors hired by the company to perform work that would otherwise be carried out by an employee;

    2. contractors hired by the company to perform work in a public area (e.g., on a road, on the street);

    3. contractors hired by the company to deliver the work/service directly at the workplace of a client of the company.

  1. people employed by a third party engaged in ‘employment activities’ and perform the same work that employees carry out, such as:

    1. people who fill in for employees who are temporarily absent (due to illness, holiday, parental leave, etc.);

    2. people performing work additional to regular employees;

    3. people who are dispatched temporarily from another EU member state to work for the company (‘posted workers’).

(Expand each chapter below to view more details about the disclosure requirements in this standard.)

CH 1. Strategy

When responding to ESRS 2 SBM-2, the company should disclose how the interests, views, and rights of people in its own workforce, including respect for their human rights, influence its strategy and business model. The company’s own workforce is an important group of stakeholders affected by its activities.

ESRS 2 SBM-2 requires the company to explain whether and how it considers the role that its strategy and business model may have in creating, worsening, or reducing significant material impacts on its own workforce, and whether and how the business model and strategy are adjusted to address these material impacts.

While the company’s own workforce may not be directly involved in the strategy or business model, their views can help the company assess its strategy and business model. The company should take into account the views of workers’ representatives when relevant for this disclosure.

When disclosing information required in ESRS 2 SBM-3 (par 48), the company should disclose:

  1. whether and how actual and potential impacts on its own workforce as identified in ESRS 2 IRO-1:

    1. originate from or are connected to the company’s strategy and business models; and

    2. inform and contribute to adapting the company’s strategy and business model;

  2. the relationship between its material risks and opportunities arising from impacts and dependencies on own workforce and its strategy and business model.

Impacts on the company’s own workforce can originate from its strategy or business model in several ways. For example, impacts may relate to the company’s value proposition, such as providing lowest cost products or services, or high-speed delivery, in ways that put pressure on labour rights in its own operations, or its cost structure and revenue model, such as shifting inventory risk to suppliers, which can have knock-on effects on the labour rights of people who work for them.

These impacts can also create material risks for the company. For example, risks can arise if some people in the workforce are at risk of forced labour, and the company is importing products into countries where the law permits the confiscation of goods suspected to be made with forced labour. An opportunity for the company could arise from offering job creation and upskilling for its workforce, particularly in the context of a “just transition”. Another example is in a pandemic or other severe health crisis, where the company may rely on contingent labour with little to no access to sick care or health benefits, potentially facing severe operational and business continuity risks. This could happen if workers are forced to keep working while sick, leading to the spread of disease and major supply chain disruptions. Additionally, reputational and business opportunity risks related to the exploitation of low-skilled, low-paid workers in sourcing regions with minimal protections are increasing. These risks are linked to media backlash and consumer preferences shifting towards more ethically sourced or sustainable goods.

When fulfilling the requirements of ESRS 2 SBM-3 (par 48), the company should disclose whether all people in its own workforce who could be materially impacted by the company are included in the scope of its disclosure under ESRS 2. These material impacts should include impacts connected with the company’s own operations and its value chain, including through its products or services, as well as through its business relationships. In addition, the company should provide the following information:

  1. a brief description of the types of employees and non-employees in its own workforce subject to material impacts by its operations, and specify whether they are employees, self-employed people, or people provided by third-party companies primarily engaged in employment activities;

  2. in the case of material negative impacts, whether they are either:

    1. widespread or systemic in contexts where the company operates for example, child labour or forced labour or compulsory labour in specific countries or regions outside the EU, or

    2. related to individual incidents for example, an industrial accident or an oil spill;

  3. in the case of material positive impacts, a brief description of the activities that result in the positive impacts, the types of employees and non-employees in its own workforce that are positively affected or could be positively affected, and whether the positive impacts occur in specific countries or regions;

  4. any material risks and opportunities for the company arising from impacts and dependencies on its own workforce;

  5. any material impacts on its own workforce that may arise from transition plans for reducing negative impacts on the environment and achieving greener and climate-neutral operations, including information on the impacts on the own workforce caused by the company’s plans and actions to reduce carbon emissions in line with international agreements. IROs include restructuring and employment loss, as well as opportunities arising from job creation and reskilling or upskilling;

  6. operations at significant risk of incidents of forced, compulsory or child labour either in terms of:

    1. the type of operation, such as manufacturing plant, or

    2. countries or geographic areas with operations considered at risk;

In describing the main types of people in its own workforce who are or could be negatively affected, based on the materiality assessment set out in ESRS 2 IRO 1, the company should disclose whether and how it has developed an understanding of how people with particular characteristics, those working in particular contexts, or those company particular activities may be at greater risk of harm. For example:

  1. young people, who may be more vulnerable to impacts on their physical and mental development;

  2. women, especially in contexts where women face routine discrimination in terms and conditions of work; or

  3. migrants, particularly in areas where the labour market is poorly regulated and workers are often charged recruitment fees.

For some individuals in the workforce, the nature of the tasks they are required to perform may put them at greater risk. This includes people who are required to handle chemicals or operate certain equipment, as well as low-paid employees on “zero hours” contracts.

The company should disclose which, if any, of its material risks and opportunities arising from impacts and dependencies on people in its own workforce relate to specific groups of people, for example, particular age groups, or people working in a particular factory or country, rather than to all of its own workforce, for example, a general pay cut, or training offered to all people in its own workforce.

CH 2. Impacts, risks and opportunities management

The company should describe the policies it has put in place to manage its material impacts on its own workforce, along with the associated material risks and opportunities. This disclosure should be inline with ESRS 2 : MDR-P. Additionally, the company should specify whether these policies apply to specific groups within its workforce or the entire workforce.

More specifically, the company should disclose:

  1. whether and how policies regarding its own workforce are aligned with relevant internationally recognized instruments, including the UN Guiding Principles on Business and Human Rights;

  2. whether its policies regarding its own workforce explicitly address trafficking in human beings, forced labour or compulsory labour, and child labour.

  3. whether it has specific policies aimed at eliminating discrimination, including harassment, promoting equal opportunities, and advancing diversity and inclusion;

  4. whether the following grounds for discrimination are specifically covered in the policy:

    racial and ethnic origin, colour, sex, sexual orientation, gender identity, disability, age, religion, political opinion, national extraction or social origin, or other forms of discrimination covered by Union regulation and national law;

  5. whether the company has specific policy commitments related to inclusion or positive action for people from groups at particular risk of vulnerability in its own workforce, and if so, what these commitments are;

  6. whether and how these policies are implemented through specific procedures to prevent, mitigate, and address discrimination when detected, as well as to promote diversity and inclusion in general.

The company should consider whether explaining significant changes to the policies adopted during the reporting year, such as new expectations for foreign subsidiaries, or new approaches to due diligence and remedy, provides useful context for users. If so, the company may disclose such explanations. This includes policies and commitments to prevent or reduce the risks and negative impacts on people in its own workforce caused by reducing carbon emissions and transitioning to greener, climate-neutral operations, as well as providing opportunities for the workforce, such as job creation and upskilling, including explicit commitments to a ‘just transition’.

The policy may be a separate document specifically about the company’s own workforce, or it may be part of a broader document, such as a code of ethics or a general sustainability policy that the company has already disclosed as part of another ESRS. In such cases, the company should provide a clear cross-reference to identify the sections of the policy that meet the requirements of this disclosure requirement.

When explaining how external-facing policies are embedded, the company may consider internal policies related to responsible sourcing and how they align with other policies concerning its own workforce, such as those addressing forced labour. Regarding supplier codes of conduct, the company should specify whether these codes include provisions on worker safety, precarious work, such as the use of short-term or limited hours contracts, third-party workers, subcontracting, or informal workers, human trafficking, forced labour, or child labour. It should also indicate whether these provisions fully align with applicable ILO standards.

The company may provide examples of how it communicates its policies to relevant individuals, groups, or entities. This includes those expected to implement the policies e.g., employees, contractors, suppliers or those with a direct interest in their implementation e.g., people in the workforce and investors. The company may disclose communication methods and channels, such as flyers, newsletters, dedicated websites, social media, face-to-face interactions, or workers’ representatives, to ensure the policy is accessible and that different audiences understand its implications. Additionally, the company may explain how it identifies and removes barriers to dissemination, such as translating materials into relevant languages or using graphic depictions.

The company may also disclose whether it:

  1. has policies and procedures that use qualifications, skills, and experience as the basis for recruitment, placement, training, and promotion at all levels, while considering that some individuals may face more challenges in acquiring these qualifications, skills, and experience;

  2. assigns responsibility at the top management level for equal treatment and opportunities in employment, issues clear company-wide policies and procedures to guide equal employment practices, and ties advancement to performance in this area;

  3. provides staff training on non-discrimination policies and practices, particularly for middle and upper management, to raise awareness and develop strategies for preventing and addressing both systemic and incidental discrimination;

  4. makes adjustments to the physical environment to ensure health and safety for workers, customers, and other visitors with disabilities;

  5. evaluates whether job requirements are defined in a way that could systematically disadvantage certain groups.

The objective of this disclosure requirement is to enable users to understand how the company engages, as part of its ongoing due diligence process, with individuals in its own workforce and workers’ representatives regarding material, actual, and potential positive and/or negative impacts that affect or are likely to affect them. It also seeks to clarify whether and how the perspectives of the company’s own workforce are considered in its decision-making processes.

The company should disclose whether and how the perspectives of its own workforce inform its decisions or activities for managing actual and potential impacts on them. This disclosure should include, where relevant, an explanation of:

  1. whether engagement occurs directly with the company’s own workforce or through workers’ representatives;

  2. the stage(s) at which engagement takes place, the type of engagement, and the frequency of such engagement;

  3. the function and the most senior role within the company responsible for ensuring that this engagement occurs and that the results inform the company’s approach;

  4. where applicable, any agreement with workers’ representatives related to respecting the human rights of its own workforce, including how such agreements help the company understand the perspectives of its own workforce; and

  5. where applicable, how the company assesses the effectiveness of its engagement with its own workforce, including relevant agreements or outcomes that result from such engagement.

Where applicable, the company should disclose the steps it takes to gain insight into the perspectives of people in its own workforce who may be particularly vulnerable to impacts and/or marginalised. Examples of such groups include women, migrants, and people with disabilities.

If the company has not adopted a general process to engage with its own workforce and is therefore unable to disclose the required information, it should state this explicitly. Additionally, the company may disclose a timeframe within which it plans to establish such a process.

When describing the function or role responsible for engagement and/or accountability, the company may specify whether this responsibility is assigned to a dedicated role or function, or whether it is part of a broader role or function. The company may also disclose any capacity-building activities provided to staff to support them in carrying out engagement activities. If the company cannot identify a position or function with such responsibility, it should state this explicitly. This disclosure requirement may also be fulfilled by referencing information disclosed under ESRS 2 GOV-1 regarding the role of the administrative, management, and supervisory bodies.

When preparing disclosures on the stages, types and frequency of engagement (point #2 above), the company may include the following illustrations:

  1. stages of engagement, for example:

    1. determining the approach to mitigation;
    2. evaluating the effectiveness of mitigation measures.

  2. types of engagement, for example participation, consultation, and/or information-sharing activities.

  3. frequency of engagement for example:

    1. whether engagement occurs regularly or at specific points in a project or business process e.g., the start of a new harvest season or the opening of a new production line;
    2. whether engagement is driven by legal requirements and/or stakeholder requests;
    3. how the results of engagement are integrated into the company’s decision-making processes.

When preparing disclosures on the role with operational responsibility (point #3 above), the company may provide details on:

  1. whether it requires relevant staff to possess specific skills;

  2. any training or capacity-building activities provided to staff to enable effective engagement.

The company may provide examples from the current reporting period to illustrate how the perspectives of its own workforce have influenced specific decisions or activities.

If the company has agreements with national, European, or international trade unions or work councils regarding the rights of its own workforce, it can disclose these agreements to demonstrate how they help the company gain insight into the perspectives of its workforce.

The company should consider the following aspects when fulfilling this disclosure requirement:

  1. the type of engagement, such as information sharing, consultation, or participation, and how often it occurs (e.g., ongoing, quarterly, or annually);

  2. how feedback is recorded, integrated into decision-making, and communicated back to the workforce to show how their input has influenced decisions;

  3. whether engagement happens at the organizational level or at a lower level (like site or project level), and if it’s at a lower level, how information from these activities is centralized;

  4. the resources (e.g., financial or human resources) allocated for engagement activities;

  5. how the company engages with its workforce and workers’ representatives on impacts related to reducing carbon emissions and transitioning to greener, climate-neutral operations, including impacts like restructuring, employment changes (loss or creation), training and upskilling, gender and social equity, and health and safety.

On matters to do with diversity, the company may disclose:

  1. how it engages with people at risk or in vulnerable situations, and whether it adopts specific approaches or gives special attention to potential barriers they may face;

  2. how it takes into account potential barriers to engagement, such as language and cultural differences, gender and power imbalances, or divisions within a community or group;

  3. how it provides people in its workforce with information that is understandable and accessible, using appropriate communication channels;

  4. any conflicting interests that have arisen among its workforce and how the company has addressed and resolved these conflicts;

  5. how it respects the human rights of all stakeholders engaged, including their rights to privacy, freedom of expression, and peaceful assembly and protest.

The company may also report information about the effectiveness of processes for engaging with its own workforce from previous reporting periods. This applies in cases where it has assessed the effectiveness of these processes or derived lessons during the current reporting period. Processes used to track effectiveness can include internal or external auditing or verification, impact assessments, measurement systems, stakeholder feedback, grievance mechanisms, external performance ratings, and benchmarking.

The company should describe the processes it has in place to address or cooperate in the remediation of negative impacts on people in its own workforce. It should also outline the channels available to its own workforce to raise concerns and have them addressed.

The company should describe these processes by disclosing the following information:

  1. its general approach and processes for providing or contributing to remedy when it has caused or contributed to a material negative impact on people in its own workforce, including how the company assesses the effectiveness of the remedy provided;

  2. any specific channels it has in place for its own workforce to raise concerns or needs directly with the company and have them addressed, including whether these channels are established by the company itself and/or through participation in third-party mechanisms;

  3. whether the company has a grievance/complaints handling mechanism related to employee matters;

  4. the processes through which the company supports the availability of such channels in the workplace for its own workforce; and

  5. how the company tracks and monitors issues raised and addressed, and ensures the effectiveness of the channels, including through the involvement of stakeholders who are the intended users.

The company should disclose whether and how it assesses that people in its own workforce are aware of and trust these structures or processes as a way to raise their concerns or needs and have them addressed. Additionally, the company should disclose whether it has policies in place to protect individuals who use these channels, including workers’ representatives, from retaliation. If such information has been disclosed in accordance with ESRS G1-1, the company may refer to that information.

If the company cannot disclose the information required in this disclosure, because it has not adopted a channel for raising concerns and/or does not support the availability of such a channel in the workplace for its own workforce, it should disclose this. It may also disclose a timeframe in which it aims to establish such a channel.

Channels for raising concerns or needs include grievance mechanisms, hotlines, trade unions (where the workforce is unionized), works councils, dialogue processes, or other means through which the company’s own workforce or workers’ representatives can raise concerns about impacts or express needs they would like the company to address. This could include both channels provided directly by the company and channels provided by the entities where its workforce is working, in addition to any other mechanisms the company may use to gain insight into the management of impacts on its own workforce, such as compliance audits. If the company is relying solely on information about the existence of such channels provided by its business relationships to answer this requirement, it may state that.

The company should consider whether and how people in its own workforce who may be affected, and their workers’ representatives, are able to access channels at the level of the company they are employed by or contracted to work for, in relation to each material impact. Relevant channels may include hotlines, trade unions (where the workforce is unionized), works councils, or other grievance mechanisms operated by the relevant company or by a third party.

In explaining whether and how the company knows that people in its own workforce are aware of and trust any of these channels, the company may provide relevant and reliable data about the effectiveness of these channels from the perspective of the people concerned. Examples of sources of information include surveys of people in the company’s workforce who have used such channels, and their levels of satisfaction with the process and outcomes.

In describing the effectiveness of channels for its own workforce and workers’ representatives to raise concerns, the company may be guided by the following questions, based on the “effectiveness criteria for non-judicial grievance mechanisms”, as laid out in principle 13 of the UN Guiding Principles on Business and Human Rights:

  1. do the channels have legitimacy by providing appropriate accountability for their fair conduct and building stakeholder trust?

  2. are the channels known and accessible to stakeholders?

  3. do the channels have clear and known procedures, with indicative timeframes?

  4. do the channels ensure reasonable access for stakeholders to sources of information, advice, and expertise?

  5. do the channels offer transparency by providing sufficient information both to complainants and, where applicable, to meet any public interest?

  6. do outcomes achieved through the channels align with internationally recognized human rights?

  7. does the company identify insights from the channels that support continuous learning in both improving the channels and preventing future impacts?

  8. does the company focus on dialogue with complainants as the means to reach agreed solutions, rather than seeking to unilaterally determine the outcome?

The company should disclose how it takes action to address material negative and positive impacts, manage material risks, and pursue material opportunities related to its own workforce, as well as the effectiveness of those actions. It should provide a summarised description of the action plans and resources to manage its material IROs related to its own workforce, in accordance with ESRS 2 MDR-A.

The company should describe:

  1. actions taken, planned, or underway to prevent or mitigate material negative impacts on its own workforce;

  2. whether and how it has taken action to provide or enable remedy in relation to an actual material impact;

  3. any additional actions or initiatives it has in place with the primary purpose of delivering positive impacts for its own workforce; and

  4. how it tracks and assesses the effectiveness of these actions and initiatives in delivering outcomes for its own workforce.

The company should describe the processes through which it identifies what action is needed and appropriate in response to a particular actual or potential negative impact on its own workforce.

In relation to material risks and opportunities, the company should describe:

  1. what action is planned or underway to mitigate material risks for the company arising from its impacts and dependencies on its own workforce, and how it tracks effectiveness in practice;

  2. what action is planned or underway to pursue material opportunities for the company in relation to its own workforce.

The company should disclose whether and how it ensures that its own practices do not cause or contribute to material negative impacts on its own workforce, including, where relevant, its practices in relation to procurement, sales, and data use. This may include disclosing the approach taken when tensions arise between the prevention or mitigation of material negative impacts and other business pressures.

The company should disclose what resources are allocated to the management of its material impacts, providing information that allows users to understand how the material impacts are managed.

It may take time to understand negative impacts and how the company may be connected to them through its workforce, as well as to identify suitable responses and implement them. Therefore, the company may disclose:

  1. its general and specific methods for addressing significant negative impacts;
  2. its initiatives aimed at creating significant positive impacts;
  3. its progress during the reporting period; and
  4. its goals for further improvement.

If significant negative impacts affecting its workforce during the reporting period are connected to entities or operations outside its direct control, the company may disclose whether and how it uses its influence in business relationships to address those impacts. This may involve:

  1. using commercial influence, such as enforcing contractual requirements or offering incentives in business relationships;

  2. using other forms of influence within the relationship, such as providing training or capacity-building on workers’ rights to entities it has business relationships with;

  3. using collaborative influence with peers or other actors, such as participating in initiatives for responsible recruitment or ensuring workers receive a fair wage.

If the company discloses its participation in an industry or multi-stakeholder initiative as part of its efforts to address significant negative impacts, it may explain how the initiative and its involvement aim to address the specific impact. The company may also report, under ESRS S1-5, the initiative’s relevant targets and progress made towards achieving them.

The company may provide examples when disclosing whether and how it considers actual and potential impacts on its workforce in decisions to terminate business relationships, and whether and how it addresses any negative impacts resulting from termination.

Processes used to monitor the effectiveness of actions may include internal or external audits or verification, court proceedings and related decisions, impact assessments, measurement systems, stakeholder feedback, grievance mechanisms, external performance ratings, and benchmarking.

Reporting on effectiveness aims to provide an understanding of the connection between the actions taken by a company and the effective management of impacts. Additional information the company may include could be data demonstrating a reduction in the number of identified incidents.

For initiatives or processes primarily aimed at delivering positive impacts for people in the company’s workforce based on their needs, and for progress in implementing such initiatives or processes, the company may disclose:

  1. whether and how people in its workforce and workers’ representatives are involved in decisions about the design and implementation of these programs or processes;

  2. the intended or achieved positive outcomes of these programs or processes for its workforce.

The company may explain whether any such initiatives are also designed to support the achievement of one or more SDGs. For example, a company committed to SDG 8, which aims to “promote sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all,” may be working to eliminate forced or compulsory labour, or to enhance productivity in developing countries through technological upgrades and training of local labour. These actions can benefit both the targeted individuals in its workforce and their local communities.

When disclosing the intended or achieved positive outcomes of its actions for the workforce, a distinction must be made between evidence of specific activities taking place (for example, that a certain number of people have received financial literacy training) and evidence of actual outcomes for the people involved (for example, that those people report being able to better manage their pay and household budgets).

If the company has taken steps to reduce negative impacts on its workforce from the transition to a greener, climate-neutral economy, such as training, reskilling, employment guarantees, and in cases of down scaling or mass dismissal, measures like job counselling, coaching, intra-company placements, and early retirement plans, the company should disclose these measures. This also includes measures taken to comply with current regulations. The company may highlight present and/or expected external developments that affect whether dependencies become risks. This includes considering impacts that may arise from transitioning to greener and climate-neutral operations.

When disclosing the material risks and opportunities related to its impacts or dependencies on its own workforce, the company may consider the following:

  1. risks related to the company’s impacts on its workforce, such as reputational or legal exposure if people in the workforce are found to be subject to forced labour or child labour;

  2. risks related to the company’s dependencies on its workforce, such as disruption of business operations due to significant employee turnover or lack of skills/training development that threaten the business;

  3. opportunities related to the company’s impacts on its workforce, such as market differentiation and increased customer appeal from guaranteeing decent pay and conditions for non-employees.

When disclosing the resources allocated to managing material impacts, the company may explain which internal functions are involved in managing the impacts and what types of actions they take to address negative impacts and promote positive impacts.

CH 3. Metrics and targets

The company should disclose the time-bound and outcome-oriented targets it may have set related to:

  1. reducing negative impacts on its own workforce;

  2. advancing positive impacts on its own workforce; and/or

  3. managing material risks and opportunities related to its own workforce.

The summarised description of the targets set to manage material IROs should contain the information requirements defined in ESRS 2 MDR-T.

When disclosing information about targets, the company may disclose:

  1. the intended outcomes to be achieved in the lives of a certain number of people in its own workforce;

  2. the stability of the targets over time in terms of definitions and methodologies to enable comparability over time; and/or

  3. the standards or commitments which the targets are based on (for instance, codes of conduct, sourcing policies, global frameworks, or industry codes).

The company should disclose the process for setting the targets, including whether and how it engaged directly with its own workforce or workers’ representatives in:

  1. setting these targets;

  2. tracking the company’s performance against them; and

  3. identifying any lessons or improvements as a result of the company’s performance.

Targets related to risks and opportunities may be the same as or distinct from targets related to impacts. For example, a target to ensure adequate wages for non-employees could both reduce impacts on those people and reduce associated risks in terms of the quality and reliability of their output.

The company may also distinguish between short-, medium-, and long-term targets covering the same policy commitment. For example, the company may have a long-term target to achieve an 80% reduction in health and safety incidents affecting its delivery drivers by 2030, and a near-term target to reduce the overtime hours of delivery drivers by a certain percentage while maintaining their income by 2024.

When modifying or replacing a target in the reporting period, the company may explain the change by cross-referencing it to significant changes in the business model or to broader changes in the accepted standard or legislation from which the target is derived, to provide contextual information as per ESRS 2 BP-2.

In this section, the company should disclose:

  1. the total number of employees by head count, and broken down by gender and by country for countries in which the company has 50 or more employees representing at least 10% of its total number of employees;

  2. the total number by head count or full-time equivalent (FTE) of permanent employees, temporary employees, and non-guaranteed hours employees, broken down by gender and region (optionally);

  3. the total number of employees who have left the company during the reporting period and the rate of employee turnover in the reporting period;

  4. a description of the methodologies and assumptions used to compile the data, including whether the numbers are reported:

    1. in head count or full-time equivalent (FTE) (including an explanation of how FTE is defined); and

    2. at the end of the reporting period, as an average across the reporting period, or using another methodology;

  5. where applicable, a provision of contextual information necessary to understand the data, for example, to understand fluctuations in the number of employees during the reporting period; and

  6. a cross-reference of the information reported under (a) above to the most representative number in the financial statements.

The company may disclose the following information by head count or full-time equivalent (FTE):

  1. full-time employees, broken down by gender and by region; and

  2. part-time employees, broken down by gender and by region.

Providing a breakdown of employees by country offers insight into the distribution of activity across countries. The number of employees in each country is also a key factor for many information, consultation, and participation rights for workers and workers’ representatives.

Providing a breakdown of employees by gender and type of employment relationship gives insight into gender representation across the company. Additionally, providing a breakdown of employees by region offers insight into regional variations. A region can refer to a country or other geographic locations, such as a region within a country or a world region.

The definitions of permanent, temporary, non-guaranteed hours, full-time, and part-time employees differ between countries. If the company has employees in more than one country, it should use the definitions as per the national laws of the countries where the employees are based to calculate country-level data. The country-level data should then be added up to calculate total numbers, disregarding differences in national legal definitions.

Non-guaranteed hours employees are employed by the company without a guarantee of a minimum or fixed number of working hours. These employees may need to make themselves available for work as required, but the company is not contractually obliged to offer them a minimum or fixed number of working hours per day, week, or month. Casual employees, employees with zero-hour contracts, and on-call employees are examples that fall under this category.

Quantitative data, such as the number of temporary or part-time employees, is unlikely to be sufficient on its own. For example, a high proportion of temporary or part-time employees could indicate a lack of employment security for employees, but it could equally signal workplace flexibility when offered as a voluntary choice. For this reason, the company is required to disclose contextual information to help information users interpret the data. The company can explain the reasons for temporary employment. An example of such a reason is the recruitment of employees to undertake work on a temporary or seasonal project or event. Another example is the standard practice of offering a temporary contract (for example, six months) to new employees before an offer of permanent employment is made. The company may also explain the reasons for non-guaranteed hours employment.

For the own employee turnover calculation, the company should calculate the aggregate of the number of employees who leave voluntarily or due to dismissal, retirement, or death in service. The company should use this number for the numerator of the employee turnover rate and may determine the denominator used to calculate this rate and describe its methodology.

Where data is not available for detailed information, the company should use an estimation of the employee number or ratios, in accordance with ESRS 1, and clearly identify where the use of estimates has taken place.

This disclosure requirement provides insight into the company’s approach to employment, as well as the scope and nature of impacts arising from its employment practices. It also provides contextual information that aids an understanding of the information reported in other disclosures. This disclosure covers both individual contractors supplying labour to the company (“self-employed people”) and workers provided by companies primarily engaged in “employment activities”.

Examples of self-employed people in the company’s own workforce include: contractors hired by the company to perform work that would otherwise be carried out by an employee; contractors hired by the company to perform work in a public area (for example, on a road, on the street); and contractors hired by the company to deliver the work/service directly at the workplace of a client of the organization.

Examples of people employed by a third party engaged in ‘employment activities’ whose work is under the direction of the company include: people who perform the same work that employees carry out, such as people who fill in for employees who are temporarily absent (due to illness, holiday, parental leave, etc.); people performing regular work at the same site as employees; and workers who are dispatched temporarily from another EU member state to work for the company (‘posted workers’).

If all the people performing work for the company are employees and the company does not have any people in its workforce who are not employees, this disclosure requirement is not material for the company. The company may state this fact when disclosing the information required by DR S1-6 as contextual information, as this information can be relevant for the users of the sustainability statement.

The information required in this section includes:

  1. a disclosure of the total number of non-employees in the company’s own workforce, i.e., either people with contracts with the company to supply labour (“self-employed people”) or people provided by companies primarily engaged in “employment activities”;

  2. an explanation of the methodologies and assumptions used to compile the data, including whether the number of non-employees is reported:

    1. in headcount or full-time equivalent (FTE) (including a definition of how FTE is defined); and

    2. at the end of the reporting period, as an average across the reporting period, or using another methodology.

  3. where applicable, a provision of contextual information necessary to understand the data, for example, significant fluctuations in the number of non-employees in the company’s own workforce during the reporting period and between the current and the previous reporting period.

For the information specified in point (a) above, the company may disclose the most common types of non-employees, for example, self-employed people, people provided by companies primarily engaged in employment activities, and other types relevant to the company, their relationship with the company, and the type of work that they perform.

Where data is not available, the company should estimate the number and state that it has done so. When the company performs estimates, it should describe the basis of preparation of this estimation.

If the company cannot report exact figures, it should use estimates according to the provisions in ESRS 1 to disclose the number of people in its own workforce who are not employees to the nearest ten or, where the number of people in its own workforce who are not employees is greater than 1,000, to the nearest 100, and explain this. In addition, it should clearly identify the information that derives from actual data and estimates.

Disclosing the number of people in the company’s own workforce who are not employees at the end of the reporting period provides information for that point in time without capturing fluctuations during the reporting period. Disclosing this number as an average across the reporting period considers fluctuations during the reporting period and can provide more insightful and relevant information for users.

The information disclosed by the company allows users to understand how the number of non-employees in the company’s own workforce varies during the reporting period or compared to the previous reporting period. The company may also disclose the reasons for the fluctuations. For example, an increase in the number of non-employees during the reporting period could be due to a seasonal event. Conversely, a decrease in the number of non-employees compared to the previous reporting period could be due to the completion of a temporary project. If the company discloses fluctuations, it should also explain the criteria used to determine which fluctuations it discloses. If there are no significant fluctuations in the number of non-employees during the reporting period or between the current and previous reporting period, the company may disclose this information.

The company should disclose information on the extent to which the working conditions and terms of employment of its employees are determined or influenced by collective bargaining agreements and on the extent to which its employees are represented in social dialogue in the European Economic Area (EEA) at the establishment and European level.

The employees in the company’s own workforce who are covered by collective bargaining agreements are those who the company is required to apply the agreement to. This means that if no employees are covered by a collective bargaining agreement, the percentage reported will be zero. If an employee is covered by more than one collective bargaining agreement, they should only be counted once.

The company should disclose:

  1. the percentage of its total employees covered by collective bargaining agreements;

  2. in the EEA, whether it has one or more collective bargaining agreements and, if so, the overall percentage of its employees covered by such agreement(s) for each country in which it has significant employment, defined as at least 50 employees by head count representing at least 10% of its total number of employees; and

  3. outside the EEA, the percentage of its own employees covered by collective bargaining agreements by region.

For employees not covered by collective bargaining agreements, the company may disclose whether it determines their working conditions and terms of employment based on collective bargaining agreements that cover its other employees or based on collective bargaining agreements from other companies.

The company may disclose the extent to which the working conditions and terms of employment of non-employees in its own workforce are determined or influenced by collective bargaining agreements, including an estimate of the coverage rate.

The company should disclose the following information in relation to social dialogue:

  1. the global percentage of employees covered by workers’ representatives, reported at the country level for each EEA country in which the company has significant employment; and

  2. the existence of any agreement with its employees for representation by a European Works Council (EWC), a Societas Europaea (SE) Works Council, or a Societas Cooperativa Europaea (SCE) Works Council.

The percentage of employees covered by collective bargaining agreements should be calculated using the following formula:

Number of employees covered by collective bargaining agreementsNumber of employeesX100

This requirement is not intended to calculate the percentage of employees represented by a works council or those who belong to trade unions, as these figures can differ. The percentage of employees covered by collective bargaining agreements may be higher than the percentage of unionized employees if the agreements apply to both union and non-union members. Conversely, the percentage of employees covered by collective bargaining agreements may be lower than the percentage of unionized employees if there are no collective bargaining agreements available, or if the agreements do not cover all unionized employees.

The company should disclose the gender distribution at top management and the age distribution amongst its employees in order to provide an understanding of the gender and age diversity at the company.

The company should disclose:

  1. the gender distribution in number and percentage at top management level; and

  2. the distribution of employees by age group i.e < 30 years old, 30-50 years old, and over 50 years old.

In preparing the disclosure on gender at top management, the company should use the definition of top management as one and two levels below the administrative and supervisory bodies, unless the concept of top management has already been defined differently within the company’s operations. If this is the case, the company may use its own definition of top management and must disclose that fact along with its own definition.

The company should disclose whether its employees are paid an adequate wage according to applicable benchmarks. If not all employees are paid an adequate wage, it should specify the countries and the percentage of employees affected. If all employees are paid an adequate wage, stating this should be enough to fulfill this requirement, and no additional information is necessary.

If not all its employees are paid an adequate wage in line with applicable benchmarks, the company should disclose the countries where employees earn below the applicable adequate wage benchmark, as well as the percentage of employees earning below it, in each of these countries.

The company may also disclose the information specified in this disclosure requirement regarding non-employees in its workforce.

The lowest wage should be calculated for the lowest pay category, excluding interns and apprentices. This calculation is based on the basic wage plus any fixed additional payments guaranteed to all employees. The lowest wage shall be considered separately for each country where the company operates, except outside the EEA when the relevant adequate or minimum wage is defined at a sub-national level.

The adequate wage benchmark used for comparison with the lowest wage should not be lower than:

  1. In the EEA: the minimum wage set in accordance with Directive (EU) 2022/2041 of the European Parliament and of the Council on adequate minimum wages in the European Union. Until this directive enters into application, if there is no applicable minimum wage set by legislation or collective bargaining in an EEA country, the company should use an adequate wage benchmark defined in the directive, which should not be lower than the minimum wage in a neighboring country with a similar socioeconomic status or not lower than a commonly-referenced international norm, such as 60% of the country’s median wage or 50% of the gross average wage.

  2. Outside the EEA:

    1. the wage level established by any existing international, national, or sub-national legislation, official norms, or collective agreements, based on an assessment of the wage level needed for a decent standard of living;

    2. if none of the instruments in (i) exist, any national or sub-national minimum wage established by legislation or collective bargaining; or

    3. if none of the instruments in (i) or (ii) exist, any benchmark that meets the criteria set out by the Sustainable Trade Initiative (IDH) (‘Roadmap on Living Wages - A Platform to Secure Living Wages in Supply Chains’), including applicable benchmarks aligned with the Anker methodology or provided by the Wage Indicator Foundation or Fair Wage Network, as long as the primacy of collective bargaining for the establishment of terms and conditions of employment is ensured.

Social protection refers to all measures that provide access to healthcare and income support in situations of significant life events such as losing a job, experiencing sickness and needing medical care, giving birth and raising a child, or retiring and needing a pension.

The company should disclose whether all its employees are covered by social protection, either through public programs or benefits offered by the company, against loss of income due to any of the following major life events:

  1. sickness;
  2. unemployment starting from when the worker begins employment with the company;
  3. employment injury and acquired disability;
  4. parental leave; and
  5. retirement.

If this is the case, stating this will be sufficient to fulfill the disclosure requirement, and no further information is needed.

If not all of its employees are covered by social protection, the company should disclose the countries where employees lack social protection for one or more of the major life events listed above. For each of these countries, the company should specify the types of employees who do not have social protection for each applicable major life event.

The company may also disclose the information specified in this disclosure requirement regarding non-employees in its workforce.

The company should disclose the percentage of persons with disabilities amongst its employees subject to legal restrictions on the collection of data. This information may be broken down by gender.

The company should provide any contextual information necessary to understand the data and how it has been compiled (methodology). For example, information about the impact of different legal definitions of persons with disabilities in the different countries in which the company has operations.

The company should disclose how much training and skills development is provided to its employees and non-employees (optionally).

This disclosure should include:

  1. the percentage of employees who took part in regular performance and career development reviews, broken down by gender and category (optionally);

  2. the average number of training hours per employee, broken down by gender and category (optionally).

Employee categories refer to a breakdown of employees by their level (e.g., senior management, middle management) or function (e.g., technical, administrative, production). This breakdown is based on the company’s own human resources system. In categorizing the workforce, the company should define reasonable and meaningful employee categories that allow users to understand the differences in performance measures between these categories. The company may include a category for executive and non-executive employees.

A regular performance review is defined as a review based on criteria known to the employee and their superior, conducted with the employee’s knowledge at least once per year. The review may include evaluations by the employee’s direct superior, peers, or a broader group of employees, and may also involve the human resources department.

To disclose the information required in point #1 above, the company should use the employee headcount figures provided in DR S1-6 in the denominator to calculate:

  1. the number/proportion of performance reviews per employee; and

  2. the number of reviews in relation to the agreed number of reviews by the management.

To disclose the average required in point #2 above, the company should perform the following calculation:

Total number of training hours offered to and completed by employees per gender categoryTotal number of employees per gender category

For the total training average and the average by gender, the head count figures for total employment and employment by gender reported in DR S1-6 should be used.

The company should disclose the extent to which its own workforce is covered by its health and safety management system and provide the number of incidents related to work-related injuries, ill health, and fatalities among its own workforce. Additionally, the company should disclose the number of fatalities resulting from work-related injuries and work-related ill health of other workers working on the company’s sites.

The disclosure required here should include the following information, broken down by employees and non-employees in the company’s own workforce where applicable:

  1. the percentage of people in the workforce who are covered by the health and safety management system, based on legal requirements and/or recognized standards or guidelines;

  2. the number of fatalities due to work-related injuries and work-related ill health;

  3. the number and rate of recordable work-related accidents;

  1. The number of cases of recordable work-related ill health for employees, subject to legal restrictions on data collection;

  2. The number of days lost to work-related injuries, fatalities from work-related accidents, work-related ill health, and fatalities from ill health for employees;

The information for (b) must also be reported for other workers working on the company’s sites, such as value chain workers if they are working on those sites.

The company may also disclose the information specified in points (d) and (e) above with regard to non-employees.

The company should disclose the percentage of its employees covered by the health and safety management system using headcount, not full-time equivalent figures.

If the company’s health and safety system has been audited or certified internally or externally, the company may state this and mention the relevant standards or certifications.

Fatalities can be reported separately based on whether they were caused by work-related injuries or illnesses.

Certain incidents, such as heart attacks and seizures not related to work, and accidents during non-work travel, are generally not considered work-related unless specified by local law.

Injuries or illnesses during work travel are work-related if they happen while the person is doing work-related tasks, such as meeting customers or conducting business. If the company is responsible for transportation, incidents during commuting are considered work-related.

Injuries or illnesses while working from home are work-related only if the cause is directly linked to the work being performed, not the home environment.

Mental health issues are work-related if reported voluntarily by the affected person and confirmed by a healthcare professional as work-related.

Health problems caused by smoking, substance abuse, or lifestyle choices not related to work are not considered work-related.

Occupational diseases are not considered work-related injuries but are categorized as work-related ill health.

To calculate the rate of work-related injuries, the company should divide the number of cases by the total hours worked by employees and multiply the result by 1,000,000. This rate shows how many injuries happen per one million hours worked.

If the company cannot calculate hours worked, it can estimate based on regular working hours, taking leave into account, and explain this in the report.

Fatalities due to work-related injuries are included in the calculation of work-related injuries.

Work-related ill health includes various conditions such as musculoskeletal disorders, respiratory diseases, and mental illnesses caused by work. The company should at least report conditions listed in the ILO List of Occupational Diseases.

The company should report cases of work-related ill health identified through medical surveillance during the reporting period, even if the affected person is no longer employed.

Finally, the company should count the total number of days an employee is absent due to work-related illness or injury, including weekends and public holidays.

The company should disclose how many employees are entitled to and actually use family-related leave.

This disclosure should include:

  1. the percentage of employees who are entitled to family-related leave;

  2. the percentage of those entitled employees who actually took family-related leave, broken down by gender.

If all employees are entitled to family-related leave due to social policy or collective bargaining agreements, the company can simply disclose this to meet the requirement.

Family-related leave categories include the following:

  1. maternity leave , also called pregnancy leave: employment-protected leave of absence for employed women directly around the time of childbirth (or, in some countries, adoption);

  2. paternity leave: leave from work for fathers or, where and in so far as recognised by national law, for equivalent second parents, on the occasion of the birth or adoption of a child for the purposes of providing care;

  3. parental leave: leave from work for parents on the grounds of the birth or adoption of a child to take care of that child, as defined by each member state;

  4. carers’ leave from work: leave for workers to provide personal care or support to a relative, or a person who lives in the same household, in need of significant care or support for a serious medical reason, as defined by each member state.

Employees who are entitled to family-related leave are those covered by regulations, policies, agreements, contracts, or collective bargaining agreements that provide such entitlements. The company should be aware of or have been informed about the entitlement.

The objective of this disclosure requirement is:

  1. to provide an understanding of the extent of any gap in the pay between women and men amongst the company’s employees; and

  2. to provide insight into the level of remuneration inequality and whether wide pay disparities exist.

The disclosure required in this section includes:

  1. the gender pay gap, defined as the difference of average pay levels between female and male employees, expressed as percentage of the average pay level of male employees;

  2. the annual total remuneration ratio of the highest paid individual to the median annual total remuneration for all employees (excluding the highest-paid individual); and

  3. where applicable, any contextual information necessary to understand the data and how it has been compiled and other changes to the underlying data that are to be considered.

The company may also disclose the gender pay gap between employees by categories of employees broken down by ordinary basic salary and complementary or variable components.

The company may adjust the figure in point #b above for purchasing power differences between countries, and disclose the methodology used for the calculation.

To calculate the gender pay gap, the company should include the gross hourly pay level for all employees. The gender pay gap can be calculated using the following formula:

(Average gross hourly pay level for male employees)−(Average gross hourly pay level for female employees)(Average gross hourly pay level for male employees)

When disclosing the gender pay gap, the company should provide contextual information to help interpret the data and explain how it was compiled. This includes details on the methodology used to calculate the gender pay gap. Additionally, the company may report how objective factors, such as the type of work or the country of employment, influence the gender pay gap.

The company should report the gender pay gap for the current reporting period, as well as for the previous two reporting periods if this information was included in earlier sustainability reports. This allows for a clear comparison of the gender pay gap over time.

When calculating the annual total remuneration ratio, the company should:

  1. include all employees;

  2. consider the following components of remuneration, depending on the company’s policies:

    1. base salary, which is the guaranteed, short-term, and non-variable cash compensation;

    2. benefits in cash, which is the base salary plus any cash allowances, bonuses, commissions, profit-sharing, and other variable cash payments;

    3. benefits in kind, which are non-cash benefits such as cars, private health insurance, life insurance, and wellness programs;

    4. direct remuneration, which encompasses all benefits in cash and in kind, as well as the total value of long-term incentives (e.g., stock options, restricted stock units, performance-based stock awards, phantom stock shares, stock appreciation rights, long-term cash awards);

  3. apply the formula below:

Annual total remuneration for the company′s highest paid individualMedian employee annual total renumeration (excluding the highest−paid individual)

To provide clarity on the data, the company may offer an explanation of how it was gathered and the methodology behind it. Relying solely on quantitative data, such as the annual total remuneration ratio, might not fully reveal the reasons behind pay disparity. For example, there are factors that could influence pay ratios, such as the organization’s revenue and employee count, sector, the extent to which the company uses outsourced labor, part-time workers, or automation that may affect the pay distribution and variations in exchange rates. Providing this type of contextual information helps explain the factors influencing the data and offers a clearer understanding of the pay disparity and its drivers.

The company should disclose the number of work-related incidents and/or complaints and severe human rights impacts within its own workforce, and any related material fines, sanctions or compensation for the reporting period.

More specifically, the company should disclose:

  1. the total number of discrimination incidents, including harassment, reported during the reporting period;

  2. the number of complaints filed through channels for employees to raise concerns, such as grievance mechanisms, and where applicable, to the National Contact Points for OECD Multinational Enterprises, regarding matters defined in the standard. This should exclude those already included in (a);

  3. the total amount of fines, penalties, and compensation for damages resulting from the incidents and complaints disclosed, along with a reconciliation of these amounts with the most relevant figures in the financial statements;

  4. any necessary contextual information to help users understand the data and the methodology used to compile it.

The company should disclose the following regarding severe human rights incidents such as forced labor, human trafficking, or child labor:

  1. the number of severe human rights incidents related to the workforce during the reporting period, including the number of incidents where the UN Guiding Principles on Business and Human Rights, ILO Declaration on Fundamental Principles and Rights at Work, or OECD Guidelines for Multinational Enterprises were not respected. If no such incidents have occurred, the company must state this.

  2. The total amount of fines, penalties, and compensation for damages related to the incidents mentioned in (a), along with a reconciliation of these amounts with the most relevant figures in the financial statements.

Additionally, the company may provide the following updates on incidents or complaints and actions taken:

  1. incidents reviewed by the company;

  2. remediation plans being implemented;

  3. remediation plans that have been implemented, with results reviewed through internal management processes;

  4. incidents no longer subject to action.

When disclosing information in this section, the company should consider the following:

  1. an incident is no longer subject to action if it has been resolved, the case is complete, or no further action is required. This includes cases that have been withdrawn or where the circumstances leading to the incident no longer exist;

  2. remedial action may be directed at both the victim and the harasser. Actions for the victim may include covering counseling expenses, offering paid time off, or restoring sick/vacation days used.

  3. for the harasser, actions could include warnings, counseling, mandatory training, or suspension without pay. More serious discipline may be required if harassment continues after previous actions.

Severe human rights incidents include lawsuits, formal complaints, or serious allegations linked to the company’s workforce, where the company does not dispute the incident. This also includes any other severe impacts the company is aware of.

Additionally, the company may disclose the number of severe human rights incidents where it helped secure remedies for those affected during the reporting period.


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Footnotes

  1. Just transition describes the transition to a climate-neutral economy while securing the future and livelihoods of workers and their communities. It provides and guarantees better and decent jobs, social protection, more training opportunities and greater job security for all workers affected by global warming and climate change policies.↩︎

  2. Remediation is the process of correcting or fixing a problem.↩︎