🧾 ESRS S3 – Affected Communities: Reporting Essentials

European Sustainability Reporting Standard ESRS S3 focuses on “affected communities” – people and groups outside the workforce who may be positively or negatively impacted by an undertaking’s operations, products, services or value chain.

The objective of ESRS S3 is to enable users of sustainability statements to understand:

• The nature and severity of impacts on affected communities.
• Actions taken to prevent, mitigate or remediate those impacts.
• Related material risks, opportunities and financial effects for the undertaking.

Undertakings with fewer than 750 employees may omit certain ESRS S3 data points for the first two reporting years, but they must still perform a materiality assessment and explain any omission under ESRS 2.

ESRS S3 within the Social ESRS Framework

ESRS S3 is one of four social standards:

• ESRS S1 – Own workforce.
• ESRS S2 – Workers in the value chain.
• ESRS S3 – Affected communities.
• ESRS S4 – Consumers and end‑users.

While ESRS S1 and ESRS S2 focus on workers, ESRS S3 concerns communities living near sites, in sourcing regions or otherwise affected by operations or business relationships.

It applies to both actual and potential impacts, across own activities and the value chain.

ESRS S3 disclosures are prepared together with ESRS 2 on general disclosures, strategy, governance, impacts, risks and opportunities, metrics and targets.

📜 Sustainability Matters Covered by ESRS S3

ESRS S3 addresses community‑related human rights and social topics, grouped into three main areas:

• Communities’ economic, social and cultural rights
• Adequate housing, food, water and sanitation.
• Land‑related impacts, including acquisition, use and access.
• Security‑related impacts, for example in conflict‑affected areas.

• Communities’ civil and political rights
• Freedom of expression and freedom of assembly.
• Impacts on human rights defenders.

• Rights of indigenous peoples
• Free, prior and informed consent.
• Self‑determination and protection of cultural rights.

These matters cover both adverse impacts (for example displacement or loss of access to resources) and positive impacts, such as local employment or infrastructure.

📘 Interaction with ESRS 2 and International Frameworks

ESRS S3 builds on ESRS 1 (general principles) and ESRS 2 (general disclosures).

In particular, community‑related information links to:

• Strategy and business model disclosures on material impacts, risks and opportunities.
• Governance disclosures on roles and responsibilities for human rights and community issues.
• Policies, actions, resources, metrics and targets in relation to affected communities.

The standard is aligned with key international instruments, including:

• International Bill of Human Rights.
• International Labour Organization Declaration on Fundamental Principles and Rights at Work.
• International Labour Organization Convention concerning Indigenous and Tribal Peoples.
• OECD Guidelines for Multinational Enterprises.
• United Nations Guiding Principles on Business and Human Rights.
• United Nations Declaration on the Rights of Indigenous Peoples.

Undertakings are expected to explain how their policies and practices reflect these frameworks.

📜 ESRS S3‑1 – Policies Related to Affected Communities

ESRS S3‑1 requires disclosure of policies dealing with material impacts, risks and opportunities relating to communities.

Undertakings explain:

• The key content, scope and communication of policies relevant to affected communities.
• Whether policies apply to all communities or to specific groups, such as indigenous peoples or communities near particular sites.
• Any dedicated provisions for preventing and addressing impacts on indigenous peoples.
• How policies align with internationally recognised standards and guidelines.
• The extent and nature of any reported cases of non‑respect of those standards in own activities or the value chain, and how such cases are handled.

In addition, undertakings present their human rights policy commitments and the general approach to respecting community rights, engaging with communities and providing or enabling access to remedy.

🤝 ESRS S3‑2 – Engagement with Affected Communities

ESRS S3‑2 focuses on processes for engaging with communities about impacts.

Disclosures cover:

• Who is engaged
• Affected communities directly.
• Legitimate representatives or credible proxies with insight into community perspectives.
• Specific vulnerable or marginalised groups, including women and girls.

• How and when engagement occurs
• Stages in which engagement takes place, such as assessing impacts, defining mitigation, and reviewing effectiveness.
• Types of engagement, including participation, consultation and information‑sharing.
• Frequency of engagement, whether regular or tied to specific projects or decisions.

• Responsibility and effectiveness
• Functions and most senior roles responsible for engagement.
• Any training or capacity‑building for staff involved.
• How the effectiveness of engagement is evaluated and which agreements or outcomes have resulted.

Where affected communities are indigenous peoples, undertakings explain how particular rights are respected, including the requirement for free, prior and informed consent and consultation on engagement methods.

🛡️ ESRS S3‑3 – Remediation and Channels to Raise Concerns

Under ESRS S3‑3, undertakings describe how communities can raise concerns and how negative impacts are remediated:

• General approach and processes for providing or contributing to remedy when harm occurs.
• How the effectiveness of remedy is assessed from the perspective of affected communities.
• Channels available for raising concerns or needs, such as:
• Grievance mechanisms.
• Hotlines or digital tools.
• Dialogue processes or mediation.
• Third‑party mechanisms (for example those operated by public authorities, non‑governmental organisations or industry initiatives).
• How the availability of such channels is supported or required in business relationships.
• Systems to track, monitor and address issues raised, and methods used to test the effectiveness of channels with stakeholders.
• How community awareness and trust in these mechanisms are assessed.
• Whether policies exist to protect individuals from retaliation when they raise concerns.

📊 ESRS S3‑4 and S3‑5 – Actions, Metrics and Targets

ESRS S3‑4 requires information on actions and resources used to manage material community‑related impacts, risks and opportunities, and on the effectiveness of those actions.

Undertakings disclose:

• How they determine what actions are needed for specific actual or potential negative impacts.
• Actions taken in relation to material impacts, including those linked to land acquisition, planning, construction, operation or closure of sites.
• Whether broader industry or collaborative action is required with other entities.
• How they have provided or enabled remedy for actual material impacts.
• Any additional initiatives whose primary purpose is to deliver positive outcomes for affected communities.
• How they track and assess the effectiveness of actions and initiatives, including severe human rights issues and incidents connected to communities.

ESRS S3‑5, together with ESRS 2 requirements on metrics and targets, adds quantitative transparency:

• Community‑related targets, performance against each target, and significant trends or changes.
• How targets are monitored and reviewed, and whether progress is in line with initial plans.
• Metrics used to evaluate performance and effectiveness in relation to material community‑related impacts, risks and opportunities.
• Whether metric measurements are validated by an external body and, if so, which body.

✅ Practical Implications for Undertakings

To implement ESRS S3 affected communities requirements, undertakings typically need to:

• Map communities that may be affected by operations or value chains, including indigenous and vulnerable groups.
• Conduct ongoing human rights due diligence to identify material impacts and dependencies.
• Align policies and human rights commitments with ESRS S3 topics and international standards.
• Document structured engagement processes and responsibilities.
• Establish or strengthen grievance mechanisms that are trusted, accessible and free from retaliation.
• Define realistic targets and develop reliable metrics for community‑related performance.

🤝 How ComplyMarket Supports ESRS S3 Compliance

ESRS S3 introduces detailed expectations on community impacts, engagement and remedy.

ComplyMarket supports undertakings by:

• Reviewing existing policies and procedures against ESRS S3 and ESRS 2 disclosure requirements.
• Assisting in mapping affected communities and prioritising material impacts, risks and opportunities.
• Designing or enhancing community engagement processes and grievance mechanisms.
• Supporting the development of appropriate targets, indicators and data collection processes.
• Drafting clear, structured ESRS S3 narratives and quantitative disclosures for sustainability statements.

Through this support, undertakings can address ESRS S3 – Affected communities in a consistent, transparent and regulation‑aligned manner, supported by ComplyMarket.