Separating HR policies (ESRS S1-1), action plans (ESRS S1-4), targets (ESRS S1-5) and metrics (ESRS S1-9 to S1-17) is not efficient for the understanding of users. Can we put into one chapter, for each material issue (e.g., health and safety), the policy with the targets, the action plan, and the metrics?

ESRS S1 paragraph 11, ESRS 1 Chapter 8, ESRS 1 Appendix F

Key terms: Structure of sustainability statement

ESRS 1 Chapter 8 provides the basis for the presentation of information about sustainability matters prepared in compliance with Articles 19a and 29a of Directive 2013/34/EU (i.e., the sustainability statement) within the undertaking’s management report.

ESRS 2 paragraph 49 states that ‘The undertaking may disclose the descriptive information required in paragraph 46 – ESRS 2 SBM-3 – alongside the disclosures provided under the corresponding topical ESRS, in which case it shall still present a statement of its material impacts, risks and opportunities alongside its disclosures prepared under this chapter of ESRS 2.’

ESRS S1 paragraph 11 specifies that the ESRS 2 General disclosures in topical standards shall be presented alongside the disclosures required by ESRS 2 except for ESRS 2 SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model, for which the undertaking has an option to present the disclosures alongside the topical disclosures.

In relation to the presentation of information required by a topical standard, flexibility is provided to the undertaking as there are no specific requirements defining how an undertaking shall present the reported information related to a specific topic required by a given topical standard.

Therefore, for a given material matter (for example, health and safety) the undertaking may present the applicable disclosures on policies, actions, targets and metrics all together and does not have to follow the structure of the disclosure requirements within the topical standard, such as ESRS S1 Own workforce.

Regarding the overall sustainability reporting, ESRS 1 paragraph 115 clarifies that the sustainability statement must be structured in four parts: ‘general information, environmental information, social information and governance information’. A particular treatment is anticipated for ESRS 2 General disclosures required by topical standards, which can be either presented alongside the other ESRS 2 General disclosures or alongside the respective topical disclosures (environmental, social and governance). In case the ESRS 2 General disclosures required by topical standards are presented alongside other topical disclosures, the undertaking still has to present a statement of its material impacts, risks and opportunities alongside its disclosures prepared under ESRS 2 SBM-3. Appendix F of ESRS 1 provides a non-binding structure for a sustainability statement.

Can you please specify if for the below indicators: (a) 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; should we include variable components of salary or only gross wage?

ESRS S1-16 paragraph 95, paragraph 97, paragraph 98

Key terms: Gender pay gap, gross wage, variable components of salary

The ESRS Annex II ‘Acronyms and Glossary of Terms’ states the following:

‘PAY: the ordinary basic or minimum wage or salary and any other remuneration, whether in cash or in kind, which the worker receives directly or indirectly (“complementary or variable components”) in respect of his/her employment from his/her employer. “Pay level” means gross annual pay and the corresponding gross hourly pay. “Median pay level” means the pay of the employee that would have half of the employees earn more and half less than they do’.

Disclosure Requirement S1-16 includes the following paragraphs on remuneration metrics (pay gap and total remuneration):

‘95. The undertaking shall disclose the percentage gap in pay between its female and male employees and the ratio between the remuneration of its highest paid individual and the median remuneration for its employees.’

‘97. The disclosure required by paragraph 95 shall include: (a) the gender pay gap, defined as the difference of average pay levels between female and male employees, expressed as a percentage of the average pay level of male employees . . .’

‘98. The undertaking may disclose a breakdown of the gender pay gap as defined in paragraph 97(a) by employee category and/or by country/segment. The undertaking may also disclose the gender pay gap between employees by categories of employees broken down by ordinary basic salary and complementary or variable components’.

ESRS S1 paragraph 97 includes additional information in a footnote as follows: ‘The gender pay gap information supports the information needs of: financial market participants subject to Regulation (EU) 2019/2088 because it is derived from a mandatory indicator related to principal adverse impacts as set out by indicator #12 in Table I of Annex I of Commission Delegated Regulation (EU) 2022/1288 with regard to disclosure rules on sustainable investments (“Unadjusted gender pay gap”); and benchmark administrators to disclose ESG factors subject to Regulation (EU) 2020/1816 as set out by indicator “Weighted average gender pay gap” in Section 1 and 2 of Annex II.’

Complementary and variable components of the employee’s remuneration package form part of the calculation. Annex II: Acronyms and Glossary of Terms defines ‘pay’ as the salary and other remuneration in cash or in kind that the employee directly or indirectly receives in respect of his/her employment.

ESRS S1-16 AR 98 describes the methodology to follow when calculating the gender pay gap required by ESRS S1-16 paragraph 97(a). The value to be used in the ratio is the gross hourly pay level.

When mentioning ‘material impacts’ in paragraph 43 of ESRS S1-4, it is unclear if you mean ‘all’ material impacts or ‘own workforce’ material impacts.

The issue raised has been reworded as follows to be clearer:

In paragraph 43 of ESRS S1 (‘the undertaking shall disclose what resources are allocated to the management of its material impacts, with information that allows users to gain an understanding of how the material impacts are managed’), it is unclear whether ‘material impacts’ is meant to cover all material impacts or only ‘own workforce’ material impacts.

ESRS S1-4 paragraph 43; ESRS S1 paragraph AR48; ESRS S1 paragraph 1.

Key terms: Actions; resources to manage material impacts

ESRS S1 paragraph 1 clarifies the objective of ESRS S1, specifying that Disclosure Requirements in this topical standard will ‘enable users of the sustainability statement to understand the undertaking’s material impacts on its own workforce.’

ESRS S1-4 paragraph 43 states: ‘The undertaking shall disclose what resources are allocated to the management of its material impacts, with information that allows users to gain an understanding of how the material impacts are managed.’

ESRS S1 paragraph AR 48 further explains: ‘When disclosing the resources allocated to the management of material impacts, the undertaking may explain which internal functions are involved in managing the impacts and what types of action they take to address negative, and advance positive, impacts.’

‘Resources allocated to the management of material impacts’ refers only to the disclosure of resources allocated to the management of material matters pertaining to the ‘own workforce’ topic.

As paragraph 43 of ESRS S1-4 is part of the topical standard on ‘own workforce’, ‘material impacts’ in that paragraph is intended to refer specifically to material impacts on own workforce.

Can you clarify the ‘global percentage reported at the country level’ in ESRS S1 paragraph 63?

ESRS S1 paragraph 63; ESRS S1 paragraph AR 69; ESRS S1 paragraph AR 70

Key terms: Social dialogue; global percentage; significant employment

ESRS S1 paragraph 63 states: ‘The undertaking shall disclose the following information in relation to social dialogue: (a) the global percentage of employees covered by workers’ representatives, reported at the country level for each EEA country in which the undertaking has significant employment . . .’

ESRS S1 paragraph AR 69 specifies that, ‘for calculating the information required by paragraph 63(a), the undertaking shall identify in which EEA countries it has significant employment (i.e., at least 50 employees representing at least 10% of its total employees). For these countries it shall report the percentage of employees in that country which are employed in establishments in which employees are represented by workers’ representatives.’

ESRS S1 paragraph AR 70 provides a template for reporting on collective bargaining coverage and social dialogue, specifying that it applies to ‘EEA countries only.’

The term ‘global’ refers to the total or overall percentage of employees in a specific EEA country working in establishments (e.g., factories, branches) with workplace representation, based on the International Labour Organisation’s (ILO) definition of workers’ representatives. Workplace representation enables social dialogue at the establishment level, which is different from social dialogue at the group, sectoral, national or EU level. As an undertaking may have several establishments in one country, the aim of this metric is to obtain the overall percentage of employees with workplace representation for each EEA country where the undertaking has significant employment (i.e., at least 50 employees representing at least 10% of its total employees).

ESRS S1 paragraph AR 70 provides a template to present this information in. The column under the heading ‘Social dialogue’ provides an example of how an undertaking with significant employment in two EEA countries (country A and country B) can report this data point.

Can you explain and give more context to the datapoint in ESRS S1 paragraph 50(f)?

ESRS S1-6 paragraph 50(f)

Key terms: Financial Statement; number of employees

ESRS S1-6 paragraph 50(f) requires undertakings to disclose ‘a cross-reference of the information reported under (a) above to the most representative number in the financial statements.’

ESRS S1-6 paragraph 50(a) requests the ‘total number of employees by head count and breakdowns by gender and by country for countries in which the undertaking has 50 or more employees representing at least 10% of its total number of employees.’

ESRS 1 paragraph 124 addresses the matter of connectivity with financial statements and states: ‘when the sustainability statement includes monetary amounts or other quantitative datapoints that exceed a threshold of materiality and that are presented in the financial statements (direct connectivity between information disclosed in sustainability statements and information disclosed in financial statements), the undertaking shall include a reference to the relevant paragraph of its financial statements where the corresponding information can be found.’

Directive 2013/34/EU, Article 16 describes the ‘Content of the notes to the financial statements relating to all undertakings’ and requires the disclosure of (1)(h) ‘the average number of employees during the financial year.’

This datapoint requirement is based on the principle of connectivity between the sustainability statement and the financial statement, which is described in ESRS 1 Chapter 9.2. In paragraphs 124 and 125 of this chapter, a distinction is made between direct connectivity (paragraph 124) and indirect connectivity (paragraph 125). In both cases, the principle is that monetary or quantitative amounts that exceed the threshold of materiality shall be cross-referenced from the sustainability statement to the financial statements; for indirect connectivity, this means explaining how these amounts relate to the most relevant amounts presented in the financial statements. Where appropriate, a reconciliation may be provided, and it may be presented in tabular form.

On this basis, the objective of ESRS 1 S1-6 paragraph 50(f) is to cross-check the number of employees required by paragraph 50(a) against the most appropriate amount disclosed in the financial statements. This includes the average number of employees during the year, disclosed according to Article 16 of the Directive 2013/34/EU as transposed into the laws of each EU Member State, and other relevant data if they are disclosed in the financial statements.

Given that ESRS S1-6 provides some flexibility in terms of methodology for calculating the head count number of employees (i.e., average or at the end of the year), the undertaking is required to disclose the methodology used as per paragraph 50(d)(ii). If an undertaking uses a different methodology for calculating the head count between the note to the financial statements and this datapoint in ESRS S1-6 (e.g., average for the former, end of the year for the latter), it shall explain the difference in the basis for calculation following the principle of connectivity defined in ESRS 1.