2022 EFRAG_Draft - ESRS S3 - Affected communities
Briefing Document: Draft ESRS S3 Affected Communities
Date: November 2022
Pages: 19
Objective
The objective of the [draft] ESRS S3 Affected Communities is to establish disclosure requirements that enable stakeholders to understand the material impacts on affected communities resulting from an undertaking's operations, products, or services. This includes identifying both positive and negative impacts and how these relate to the undertaking's business relationships and risks. The standard emphasizes the importance of considering the economic, social, and cultural rights of communities, particularly focusing on indigenous peoples' rights.
Interaction with Other ESRS
The [draft] ESRS S3 should be read in conjunction with ESRS 1 (General requirements) and ESRS 2 (General disclosures). It highlights the importance of conducting a materiality assessment to identify impacts on affected communities and their interactions with the undertaking's strategy and business models.
Disclosure Requirements
ESRS 2 General Disclosures
This section emphasizes that disclosures related to affected communities should align with the requirements of ESRS 2, particularly concerning stakeholder interests and material impacts.
- Interests and Views of Stakeholders (SBM-2): The undertaking must disclose how the interests and rights of affected communities inform its business strategy.
- Material Impacts, Risks, and Opportunities (SBM-3): The undertaking must disclose whether and how impacts on affected communities are linked to its strategy and business model, and how these impacts influence its operations.
Impact, Risk, and Opportunity Management
Disclosure Requirement S3-1: Policies Related to Affected Communities
The undertaking must describe its policies for managing impacts on communities, focusing on:
- Identification and assessment of material impacts.
- Specific provisions for indigenous communities.
- Alignment with international standards such as the UN Guiding Principles on Business and Human Rights.
Disclosure Requirement S3-2: Processes for Engaging with Affected Communities
The undertaking should outline its engagement processes, specifying how it communicates with affected communities to understand their perspectives on material impacts.
- Engagement methods and frequency.
- Assessment of the effectiveness of engagement processes.
Disclosure Requirement S3-3: Processes to Remediate Negative Impacts
This requirement mandates that the undertaking describes processes for addressing negative impacts on affected communities, including:
- Channels for raising concerns (e.g., grievance mechanisms).
- Methods for tracking and monitoring issues raised by communities.
Disclosure Requirement S3-4: Taking Action on Material Impacts
Here, the undertaking must disclose its actions to mitigate negative impacts and enhance positive outcomes for affected communities, including:
- Planned or ongoing initiatives aimed at community benefits.
- Tracking effectiveness of actions taken.
Metrics and Targets
Disclosure Requirement S3-5: Targets Related to Managing Material Impacts
The undertaking is required to disclose time-bound and outcome-oriented targets aimed at:
- Reducing negative impacts on affected communities.
- Advancing positive impacts.
- Managing material risks and opportunities related to affected communities.
Appendices
Appendix A: Defined Terms
This appendix provides essential definitions, including:
- Affected Communities: Groups impacted by the undertaking's operations.
- Free, Prior, and Informed Consent (FPIC): Rights of indigenous peoples to participate in decision-making affecting their lands and resources.
Appendix B: Application Requirements
This section outlines the application requirements, emphasizing the need to consider human rights matters in the materiality assessment and the importance of adaptive engagement with affected communities.
Key Takeaways
- The [draft] ESRS S3 Affected Communities establishes a framework for understanding and disclosing the impacts of undertakings on local and indigenous communities.
- It emphasizes the need for transparent engagement processes, effective remediation for negative impacts, and the establishment of measurable targets to improve community welfare.
- The standard reflects a growing recognition of the importance of human rights and stakeholder engagement in corporate governance and sustainability practices.
This briefing document summarizes the key points and requirements of the [draft] ESRS S3 Affected Communities, providing a concise overview for stakeholders interested in understanding corporate responsibilities towards affected communities.