30 September 2022

EFRAG sustainability TEG reviews at definition of affected communities in ESRS social standards

The EFRAG Sustainability Reporting Technical Expert Group (TEG) has explored possible amendments proposed by the EFRAG secretariat to the definition of affected communities in ESRS S3, at its 22 September meeting. The changes were suggested based on the feedback from the public consultation on the ESRS which said the definition was unclear.

The amendments were presented by TEG member Joanne Houston, who is responsible for the companies section at Frank Bold, and are made of two parts: expanding the definition and referencing specific vulnerable groups.

Expanding affected communities

The first amendment would change the wording of the definition from "local community" to "affected communities" to include people who do not live close to a company's operations but are still impacted by its activities or its activities down the value chain.

Houston said that this expanded definition was important because "impacts may occur close to the operations or further down the value chain".

The impacted communities might also live further away from the operations, she explained taking the example of water discharges that might affect communities that are not necessarily close to the operations.

Anne-Claire Ducrocq argued that including the value chain in the definition was "confusing" and would be hard to "operationalize".

Sandra Atler commented that there was no reference to individuals in the definition which should be changed to avoid a homogenous approach to communities and to encourage an approach of engagement with stakeholders that looks "to the diversity of who is actually in the local communities".

Reference to indigenous peoples

The second amendment would have the standard explicitly referencing "actually and potentially affected indigenous peoples" in its definition of affected communities.

This was recommended by GRI in its comment letter to EFRAG where it argued that including it in the definition would enable better alignment between EFRAG and GRI standards.

Atler said that the amended definition omitted a range recognised of vulnerable groups, such as women, refugees, those with disabilities and minorities. She argued that it was important to include these recognised vulnerable groups in the definition in order to align with international laws and standards on human rights.

Houston responded that including indigenous peoples in the standards was a specific request by the CSRD which is why it was specifically mentioned in the amended definition. She added that there is space to be able to integrate other vulnerable groups into the definition.

Next steps

The discussion on the proposal to amend this definition will continue at a subsequent TEG meeting before the TEG makes its recommendation to the board.