Technical Briefing: Decoding the ESRS  S1 and S2 Amendments

In July 2025 EFRAG published amended exposure drafts of the European Sustainability Reporting Standards (ESRS) for social matters – ESRS S1 Own workforce and ESRS S2 Workers in the value chain. These revisions build on the 2023 Delegated Act and respond to feedback on the complexity of the original standards. They aim to simplify reporting, simplifying the double‑materiality principle and align the standards more closely with ESRS 1 and the CSRD.

ESRS S1: Main changes in the Own workforce standard

1 Simplified objective emphasising double materiality

The revised S1 states that companies should disclose information on this topic only when it relates to material impacts, risks or opportunities. The sustainability statement is expected to cover policies, actions and targets (if any), dependencies (where relevant), metrics and financial effects. This merges the four objectives in the 2023 version into one paragraph and clarifies that the focus is on material matters (Log of Amendments, ESRS S1, p. 1–2).

2 Reorganisation of disclosure sub‑topics

To align with ESRS 1 Appendix A, the sub‑topics have been reorganised. The amended S1 requires companies to disclose information on the following aspects (Log of Amendments, ESRS S1, p. 3–4):

• Working conditions – adequate wages, work–life balance, working time, secure employment and social protection;
• Social dialogue and freedom of association – workers’ councils, participation rights and collective bargaining;
• Health and safety;
• Training and skills development;
• Diversity and equal treatment – gender equality, equal pay, inclusion of persons with disabilities, non‑discrimination and anti‑harassment;
• Other labour‑related human rights – child labour, forced labour, privacy and adequate housing.

In earlier drafts, working conditions, equal opportunities and other work‑related rights were separate sections; these are now consolidated, making the structure clearer.

3 Restructuring and simplification of metrics and data points

The July 2025 amendments go beyond re‑framing incident reporting; they prune and consolidate numerous metrics across S1. Key changes include:

• Human‑rights incidents filter: The previous requirement to list every incident, its status and remediation plan has been replaced by a double filter (AR 37–AR 39). These application requirements define what constitutes a human‑rights incident, restrict disclosure to substantiated cases and require companies to explain how incident data are compiled. Paragraphs detailing case status (AR 103–AR 106) have been deleted or moved to the NMIG, shifting the emphasis from exhaustive lists to transparent processes.
• Health and safety metrics: Only core indicators remain. Data points on work‑related ill‑health for non‑employees and workers in the value chain, and the metric “days lost to fatalities,” have been removed. The standard now aggregates fatalities from injuries and ill‑health and removes introductory paragraphs; optional breakdowns and narrative explanations have been relocated to the NMIG (Log of Amendments, ESRS S1, pp. 38–43). The disclosure still covers the extent to which the workforce is covered by a health‑and‑safety management system and the number of incidents, injuries and fatalities.
• Work‑life balance metrics: S1 retains the requirement to disclose the percentage of employees entitled to and taking family‑related leave, but the supporting paragraphs and optional breakdowns (e.g., analysis by gender or additional types of leave) have been deleted. Additional guidance is now provided only in the NMIG (Log of Amendments, ESRS S1, pp. 43–44).
• Diversity metrics: The amendments streamline diversity disclosures. Companies must still report the gender composition of top management but no longer need to disclose the age distribution of their workforce or separate metrics for management‑level pay gaps. Breakdowns by employee category, age or region are now voluntary and housed in the NMIG.
• Remuneration metrics: The core indicators—the overall gender pay gap and the ratio between the highest‑paid individual and the median employee—remain mandatory. However, breakdowns by employee category (such as management versus non‑management), by fixed versus variable pay, and any adjusted pay‑gap calculations have been deleted or made voluntary. Explanatory paragraphs are moved to guidance, leaving companies discretion over the level of detail they provide (Log of Amendments, ESRS S1, p. 44).

By streamlining these metrics, the amended S1 focuses on decision‑useful indicators while giving preparers flexibility to include additional detail in the NMIG. Users should be aware that a reduction in granularity may make it harder to benchmark practices across companies, even though the foundational metrics remain.

The amended S1 also deletes several granular data points – such as background explanations for pay ratios or detailed classifications of complaints – and relocates them to the NMIG. This reduces the mandatory reporting burden but also means companies have more discretion over how much additional information they disclose.

5 Summary of key disclosure changes in S1

The table below provides a concise overview of the main amendments to each disclosure area in ESRS S1. It highlights which elements were amended, merged, deleted or moved to NMIG and offers page references for verification.

ESRS S2: Main changes in the Workers in the value chain standard

1 Revised scope and emphasis on the value chain

The amended S2 adopts the same materiality principle as S1 – disclosures are only required when the topic relates to significant impacts, risks or opportunities. In contrast to S1’s focus on employees, S2 extends these principles to workers throughout the undertaking’s upstream and downstream value chain, including contractors and other non‑employees. To align with the terminology in ESRS 1, the sub‑topics have been reorganised to mirror S1 (working conditions; social dialogue and freedom of association; health & safety; training & skills; diversity & equal treatment; other labour‑related human rights). This alignment improves comparability between internal and value‑chain disclosures while recognising that supply‑chain workers may face different vulnerabilities.

2 Streamlined discussion of risks and opportunities

The 2023 S2 included numerous examples of risks and opportunities related to value‑chain workers (e.g., reputational exposure if forced labour is found, operational disruption due to pandemics). These examples and associated paragraphs (AR 40–AR 44) have been deleted from the mandatory standard and moved to the NMIG to reduce complexity (Log of Amendments, ESRS S2, pp. 43–44). The revised standard still requires companies to describe material risks and opportunities but leaves sector‑specific examples to voluntary guidance.

3 Restructured metrics and targets disclosure

The metrics and targets requirement previously numbered S2‑4 has been renumbered S2‑5. The amended text makes clear that companies should set time‑bound, outcome‑oriented targets that address three pillars: reducing negative impacts on value‑chain workers, advancing positive impacts and managing material risks and opportunities (Log of Amendments, ESRS S2, p. 45–46). Detailed guidance on how to define targets, keep methodologies stable over time and align them with internal policies or codes of conduct has been moved to the NMIG.

Unlike S1, the amended S2 does not prescribe a suite of quantitative workforce metrics for value‑chain workers. In the 2023 Delegated Act, several indicators (e.g., percentage of suppliers paying a living wage or incidents of discrimination in the value chain) mirrored S1 but were already voluntary. These have now been removed or moved entirely to the NMIG, acknowledging that undertakings often lack direct access to reliable data from suppliers. Instead of asking companies to replicate S1 metrics for the value chain, S2 focuses on process‑level disclosures: how the undertaking assesses and manages impacts, how it engages with suppliers and worker representatives, what resources it allocates, and what targets it sets. Preparers may still disclose quantitative metrics voluntarily, but only when the data are material and can be collected responsibly. This shift reflects a pragmatic recognition that meaningful quantitative metrics for value‑chain workers are harder to obtain and that due‑diligence processes are the primary tool for ensuring human‑rights compliance.

The renumbered S2‑5 also reinforces that targets should be developed in dialogue with affected stakeholders and accompanied by clear indicators to track progress. Companies are encouraged to explain the baselines, methodologies and any reliance on estimates. Where relevant, they should describe resource allocation (e.g., budget for supplier audits, grievance‑mechanism training) and any lessons learned when targets are not met. However, these explanations are narrative rather than numerical; the only metrics mandated in S2 relate to the existence of targets themselves and the resources dedicated to achieving them. All sector‑specific metrics and examples have been shifted to the NMIG, enabling a more flexible, materiality‑driven approach.

4 Summary of key disclosure changes in S2

The following table summarises the principal amendments to ESRS S2. It shows which areas were consolidated, simplified or moved to the NMIG and provides page references for further review.

Observations on metrics

Although the July 2025 amendments focus on streamlining the standards, many of the underlying indicators remain in place. What has changed is the level of detail required. For example, companies must still disclose an overall gender pay gap and the ratio between the highest‑paid individual and the median employee, but certain granular breakdowns – such as management‑level pay‑gap calculations – have been removed or moved to the NMIG. Likewise, metrics on training and skills development (percentage of staff receiving performance reviews and average training hours by gender) continue to be mandatory, yet optional breakdowns by job category are now non‑mandatory. Employee‑turnover figures and core health‑and‑safety indicators (work‑related injuries, lost‑time injury rates and fatalities) are preserved, ensuring continuity for trend analysis. Social‑dialogue metrics, including coverage by collective bargaining agreements, also remain, reinforcing the importance of workforce representation. Preparers should therefore understand that while the structure of the standards has shifted, the need to collect these foundational metrics has not disappeared—the revisions primarily reduce granularity and relocate narrative explanations to guidance.

Implications for stakeholders

Companies

• Reduced compliance burden – Merging objectives and removing detailed data points reduces the number of mandatory disclosures and the complexity of reports, particularly benefiting small and mid‑sized companies.
• Process‑centric reporting – New requirements focus on how incidents are identified and addressed rather than extensive lists of cases. Companies will need robust human‑rights due diligence and grievance mechanisms to report credibly.
• Transparency challenges – Moving many details to NMIG gives companies more discretion over disclosure. Some may opt to report only minimal information, potentially reducing comparability.

Investors and finance providers

• Sharper materiality focus – The double‑materiality emphasis helps investors quickly identify significant labour‑related risks and opportunities. The harmonised sub‑topics improve comparability across sectors.
• Trade‑off between comparability and depth – Deleting detailed data may limit transparency on remediation plans or pay disparities. Investors may need to engage directly with companies to obtain a complete picture.

Workers and trade unions

• Standardised complaint reporting – AR 37–AR 39 require incidents to be linked to internationally recognised human rights and to be substantiated; companies must explain their data‑collection methods. This could improve the accountability of grievance mechanisms.
• Concern over reduced detail – The shift of many data points into the NMIG may make it harder for workers’ representatives to benchmark companies. Unions may campaign for companies to voluntarily disclose more information.

Conclusion

The July 2025 amendments to ESRS S1 and S2 represent a shift from exhaustive data collection towards materiality‑driven and process‑oriented reporting. The changes simplify objectives, reorganise sub‑topics and reduce mandatory data points, while introducing a clear filter for reporting human‑rights incidents. For companies, this eases compliance but raises the bar for effective due‑diligence processes. Investors, workers and civil society should stay alert to ensure that greater flexibility does not lead to reduced transparency. Overall, the revisions reflect a maturation of EU social reporting standards: the focus is no longer on “reporting everything” but on reporting what matters and demonstrating credible management of human‑rights risks and opportunities.