Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.
Organizations preparing to report under the newly enacted European Sustainability Reporting Standards (ESRS) in 2024 may find a shift in the work they need to do to comply. That is, companies have a list of specifically defined and potentially new requirements to disclose what they are doing to address people-related impact under four different social pillars. In other words, if materiality assessments call for it, companies may need to present specific plans, actions, or targets of their material social sustainability initiatives and explain how they impact their people, including a variety of stakeholders within the organization and impacted communities.
ESRS follows a people-first approach in the social category and expands the requirements to comprehensively address the critical aspect of social sustainability, which, both in terms of quantitative and qualitative reporting data, has been considered lagging behind environmental and governance disclosures globally. This approach establishes the new framework as a means to require disclosures of social impact at a deeper and more granular level.
So, what makes ESRS different from other sustainability disclosure requirements? Unlike many other sustainability standards that are directly structured around key topics and sub-topics, the social topical standards within ESRS are designed around people, aiming to first identify and then address the needs and impacts on a whole chain of stakeholders, including companies’ own workforce, value chain workers, affected communities, and end users.
Such an approach to demonstrate intangible benefits and impacts that may not be immediately reflected in a company’s financial statements recognizes that a company’s sustainability performance is interconnected with its societal and environmental impacts. Now, social sustainability disclosures will be needed for many companies to meet regulatory requirements and enhance transparency and accountability. However, given ESRS has made a sharp leap forward in requiring companies to present granular and verifiable information to disclose social impact on people, initially, organizations may experience challenges in corralling evidence to demonstrate achievements.
To comply, organizations must understand the nature of data quality that ESRS intended for the reporting entities to present. In ESRS 1, the General Requirements state that an organization’s sustainability statements must meet five core qualitative characteristics: relevance, faithful representation, comparability, understandability, and verifiability. These guiding principles for data quality are critical because stakeholders, including investors, regulators and the public rely on these reports to make informed decisions.
Most organizations currently pursuing ESG initiatives have already implemented a great deal of initiatives to advance their sustainability goals. They may just need some tools to translate practices into relevant, comparable and verifiable data in a trust-worthy and understandable way to their stakeholders.
The WELL – ESRS alignment tool created by the International WELL Building Institute is one case in point. This tool identifies how features in the WELL Building Standard, an evidence-based, third-party verified global rating system offering building and organizational strategies to advance people’s health and well-being, can support organizations in reporting their social sustainability progress.
Since WELL is already used by thousands of organizations in nearly 140 countries in 5.5 billion square feet of real estate while the adoption continues to grow exponentially, this WELL -ESRS alignment tool should help support organizations to kick off their reporting journey under ESRS.
The third-party verification required to meet WELL requirements and achieve both WELL Certification and WELL ratings should help address the ESRS call for verifiable information. As a global standard, WELL strategies can also help address the comparability needs of data presentation. In addition, the WELL at scale pathway already built in a benchmark capability for enterprise participants against their industry peers. Horizontally, such benchmarking enables stakeholders to compare the social performance of companies on a like-for-like basis against their peers. Vertically, an enterprise’s WELL Score also demonstrates the organization’s year-over-year progress within its people-first WELL strategy framework.
Based upon the WELL–ESRS alignment tool, implementing WELL strategies may support up to 50 percent of the ESRS disclosures across the environmental, social and governance requirements, with the strongest alignment to the Social topic. Among all four social topical standards in ESRS, the requirements for S1 – a company’s own workforce more than triple the requirements of each of the other social pillars, demonstrating the importance of treating our own people well as a first step for companies to address social sustainability goals.
- S1 – Own Workforce: This pillar emphasizes workforce well-being, engagement, diversity, social protection, and skills development. WELL features can address 14 out of 17 disclosure requirements, improving employee satisfaction and productivity. Organizations can leverage WELL strategies to create a healthier, more engaged, and productive workforce.
- S2 – Workers in the Value Chain: WELL’s Responsible Labor Practice feature helps organizations disclose practices related to modern slavery and labor conditions, supporting compliance with S2 requirements and enhancing ethical standards within the supply chain.
- S3 – Affected Communities: WELL strategies in Community and Materials concepts aid in meeting requirements for community engagement, support for vulnerable populations, and mechanisms for addressing grievances. This fosters goodwill and support from local communities and guides organizations in meeting their social responsibilities.
- S4 – End Users and Consumers: While WELL does not directly address product-specific disclosures, it supports organizations in managing relationships and ensuring healthy and sustainable living conditions for end users of real estate. The Works with WELL program can contribute to product-oriented sustainability disclosures under the S4 topical standard.
The WELL-ESRS Alignment Tool can serve as an essential resource for organizations aiming to enhance their social sustainability reporting under the ESRS framework. It’s important to know that WELL also supports sustainability reporting under other ESG reporting platforms, including GRESB. Download of the WELL – ESRS alignment and WELL – GRESB tools are available to guide reporting organizations to best showcase their hard-earned progress on social sustainability. While these tools are intended to be informative and assist companies in meeting their social sustainability initiatives and disclosure obligations, they are neither intended to be comprehensive nor serve as substitutes for legal, regulatory or professional advice.
This article was written by Minjia Yang, Vice President & Head of Sustainable Finance at International WELL Building Institute.
