As the Corporate Sustainability Reporting Directive (CSRD) makes its impact felt across businesses operating in the European Union, our team is developing a series of resources to help our customers understand what’s required and where to start to comply with this Directive. This article focuses on unraveling the reporting requirements linked to social, labor, and worker impacts within the supply chain. 

What social and labor topics does CSRD cover?

While the environmental aspects get much of the focus in CSRD, it’s crucial not to overlook the ‘S’ in ESG (Environmental, Social, and Governance). The social and labor dimension covers a wide number of topics: from a business’s own workforce, to workers in the value chain, to communities affected by its operations.

The most detailed measures fall under the category of the brand’s own workforce, encompassing critical topics such as wages, remediation practices, collective bargaining, training initiatives, and health and safety protocols. Brands are expected to assess and report on each of these in detail. 

The requirements for value chain workers and affected communities are not quite as extensive — but for many businesses, publicly disclosing processes for “engaging with affected communities and their representatives about actual and potential impacts on them” may be a new endeavor. For businesses that don’t have such programs or processes at all, CSRD compliance is intended to spur action. 

How can Worldly help?

The Higg Index, hosted on Worldly, provides support across each of these measures. The Higg Brand and Retail Module (Higg BRM) offers the most relevance, while the Higg Facility Social and Labor Module (Higg FSLM) supports specific facets of social reporting. 

ESRS S1: Own Workforce

• Higg BRM contains a section specifically focused on helping apparel brands and retailers benchmark their employee-focused policies, programs, and actions against the industry’s overall performance. Companies using the Higg BRM may have much of the information needed to report or assess under ESRS S1.
• Similarly, assessing policies and targets to address pay gaps is central to the Higg BRM section on employees. In addition to asking companies to analyze “pay gaps or ratios amongst employees,” the Higg BRM also asks whether the company has formally set and approved targets to address gender pay ratios and CEO-median to worker pay ratios. Companies that complete the Higg BRM will be well-prepared for disclosure under S1-16.

ESRS S2: Workers in the Value Chain

• For brands seeking to prepare for ESRS S2 disclosure, aligning your practices with Higg BRM will accelerate the disclosure process and provide more confidence in the quality of your disclosures.
• There is widespread overlap between the value chain worker-focused section of Higg BRM and portions of ESRS S2. For example, Higg BRM prompts companies to consider whether they have implemented specific programs or strategies focused on child labor, forced labor, and modern slavery
• As a factory social data collection tool, the Higg Facility Social & Labor Module (FSLM) also has significant value in helping brands support disclosure under ESRS S2. The primary social data collected by Higg FSLM and its potential to be used as a social due diligence mechanism is relevant under several disclosure sections.

ESRS S3: Affected Communities

• Operational and value chain social impacts to communities are well-addressed in the Higg BRM. Higg BRM includes a full section focused on communities that has significant thematic overlap with the ESRS S3 disclosure requirements. 
• That said, Worldly does not directly support companies in collecting quantitative data on social impacts to their communities, which are required for some parts of ESRS S3 disclosure. Additionally, ESRS S3 has certain provisions focused around the treatment of indigenous communities, which are not specifically addressed in the Higg BRM.

Begin preparing for CSRD. 

For those seeking a deeper dive into the technical requirements of disclosure under CSRD, our customer success team has developed a full technical white paper. This resource provides comprehensive guidance, ensuring that your business is well-prepared for the evolving landscape of sustainability reporting. 

Take the first step toward compliance – reach out to our team today.