Disability and the Corporate Sustainability Reporting Directive (CSRD) – A Driver for Change?

Introduction

The European Union’s Corporate Sustainability Reporting Directive (CSRD), alongside the associated European Sustainability Reporting Standards (ESRS) bring a much stronger social dimension to the non-financial information that a swathe of EU-based companies must report on publicly.

While these frameworks target a range of environmental, social, and governance (ESG) criteria, one important but often neglected aspect in the social dimension is disability inclusion.

In this article, members of the AHEAD team will:

• Introduce the CSRD and clarify its scope.
• Provide an analysis based on our explorations of what kinds of new reporting requirements the CSRD/ESRS mandate for affected businesses in relation to disability and inclusion, with a focus on the workforce reporting requirements.
• Speculate, based on AHEAD’s 20 years of experience engaging with businesses on disability inclusion, on how these new requirements might change business behaviours into the future.

We want to caveat this piece with a disclaimer that we are 100% not legal or financial experts, just very interested observers who have spent considerable time delving into the new requirements. We are keen to share our understanding of them and our thoughts on how they might shape business approaches going forward.

It goes without saying that if you are responsible for reporting under the CSRD in your organisation, you should consult your legal team for their opinions on what should and shouldn’t be reported on.

What are the CSRD and the ESRS?

In the Action Plan on Financing Sustainable Growth, (EU Commission, 2018), the EU Commission set out measures to achieve the following objectives:

• Reorient capital flows towards sustainable investment in order to achieve sustainable and inclusive growth.
• Manage financial risks stemming from climate change, resource depletion, environmental degradation and social issues.
• Foster transparency and long-termism in financial and economic activity.

The disclosure by certain categories of businesses of relevant, comparable and reliable sustainability information, was seen by the Commission as a prerequisite for managing and meeting those objectives. After all, how can governments, investors, businesses and consumers make more inclusive, sustainable and ethical decisions about where their spending power goes, if they don’t have consistent and reliable data about the actions of competing companies. If users wish to invest their spending power in companies that are environmentally sustainable for example, then they need to be able to see standardised reporting comparing the actions of one company to the next, such as information on their organisational carbon footprints, how they source sustainable materials from suppliers, what international benchmarks their products adhere to.

The CSRD and ESRS are the legal mechanisms to make these information disclosures happen, and they go hand in hand with each other. Essentially, the CSRD published in December 2022, sets out the high-level mandate for which companies are in scope, and what information they must report. The ESRS, published in July 2023 and transposed into Irish law in 2024, lays out a set of more detailed reporting standards/guidelines which affected companies must follow to comply.

The CSRD updates the EU’s previous Non-Financial Reporting Directive (NFRD), broadening its scope and introducing stricter sustainability requirements. One of the most interesting developments in the evolution of the standards is that they introduce the concept of double materiality, which means they ask companies to assess and report on issues of:

• financial materiality, how external sustainability issues (e.g. weather events, government policies) impact a company’s financial performance – known as outside-in impacts,
• and impact materiality, how the company’s operations impact the environment and society – known as inside-out impacts.

The double materiality assessment of these areas lays the foundation for what issues businesses must include in their overall sustainability report.

Notably for our work in AHEAD, the ESRS includes requirements to disclose a far greater amount of information on social inclusion matters than previously and much more specific information related to disability and accessibility.

Who’s in Scope, when does it kick in and where do affected companies report info?

The reporting obligations under the CSRD are being phased in between now and 2029. Once the full phase-in is completed, the new reporting obligations will apply to

• All large EU companies (2025), defined as meeting at least two of the following criteria:
  • Total assets exceeding €20 million.
  • Net turnover exceeding €40 million.
  • 250+ employees.
• All SMEs listed on EU-regulated stock exchanges (2026)
• Other organisations outside of the above, including those which are in specific industries (e.g. banking, insurance) or who are subsidiaries of non-EU parent organisations of a specific size (phased in to 2029).

Affected companies in Ireland will be required to report on the ESRS in a clearly identifiable section of the directors’ report that accompanies the company’s annual financial statements. This section of the financial statements will be known as the Sustainability Statement.

What areas do affected businesses have to report on?

As well as a set of general standards applying to all areas of the business, affected organisations have to assess materiality and report impacts in the following three areas:

• Environment
• Social
• Governance

Figure 1 - Summary of ESRS Standards, originally published by EY

For the purposes of this article, we will focus largely on the social standards as it is where the strongest reporting requirements regarding equity, accessibility and disability lie. Where it gets more complex and interesting, is that businesses are asked to assess materiality, and report on social issues from four different perspectives. Of particular interest regarding access and inclusion are the following standards:

• S1:  Social impacts (positive and negative) on their own workforce, including contracted staff and student/volunteer staff. From a disability perspective, this will include reporting the percentage of the workforce that has a disability, and the policies, procedures and initiatives the company is enacting to prevent discrimination and promote inclusion at work.
• S2: Social impacts (positive and negative) on the workers in the value chain, meaning businesses must make efforts through procurement and sales processes to gather information and report on social impacts concerning the access and inclusion measures implemented by both suppliers and the businesses they sell parts/services to, to make other products.
• S4: Social impacts (positive and negative) presented by their products/services on consumers and end-users, meaning businesses will have to assess the impact, for example, of a lack of accessibility measures in their products on users who have limited/no access to them.

Given that part of AHEAD’s mission is to shape inclusive and empowering workplaces, in the next section we will take a more detailed look at the S1 reporting standard concerning a company’s own workforce. We will pull specific examples given within the standards and the associated appendices on what types of information businesses should consider and report on.

Examining the S1 Standard – Disability in the Workplace

Under ESRS S1 (Own Workforce), companies must describe policies adopted to manage ‘material social sustainability matters’ related to its own workforce, as well as associated material risks and opportunities. It sounds confusing, but don’t worry, we’ll explain in more detail and give concrete examples along the way.

Interestingly, section 12 on the general S1 requirements specifically obligates companies to firstly disclose how the interests, views, and rights of people in its own workforce, including respect for their human rights, inform its strategy and business model and secondly, to consider the companies own workforce as a key group of affected stakeholders. (See later section on S1-2)

So right in the S1 general requirements, the voice of workers in identifying and addressing human rights impacts on them is signalled as important, and companies are asked to report on the channels they have to engage employees on these matters.

Now for a closer look at the specifics of the S1 standards.

S1 – 1 Concerning company policies; will require a company to report on:

• whether it has specific policies aimed at the elimination of discrimination, including harassment, promoting equal opportunities and other ways to advance diversity and inclusion (section 24). Examples of disclosures might include reporting on the existence of a company Equality, Diversity and Inclusion (EDI) strategy, and a range of internal policies on equity such as those relating to accessibility, recruitment, reasonable accommodation and discrimination in the workplace.
• whether or not varying grounds for discrimination, including disability, are specifically referenced in the above strategies and policies (section 24(a)). In other words, this ensures disability doesn’t get left out of the general EDI and inclusive policy push.
• whether the undertaking has specific policy commitments related to inclusion or positive action for people from groups at particular risk, and more specifically what those commitments are (section 24 (d)). Examples could include policies which promote the targeted recruitment of disabled people, such as through the AHEAD WAM programme.

S1 – 2, on processes for engaging the workforce, requires companies to report on what mechanisms the company has used to engage its staff about social impacts, and goes further by:

• requiring detailed and specific information on how the perspectives of its own workforce inform its decisions or activities aimed at managing…impacts (section 27) – in other words, how companies give staff a voice in resolving issues and setting policy.
• explicitly calling out disabled staff as important stakeholders, by requiring companies to report steps they take to gain insight into the perspectives of people in its own workforce who may be particularly vulnerable to impacts and/or marginalised…. e.g. people with disabilities (section 28). This is where the value of having a disability focussed Employee Resource Group or similar is highlighted.

S1 – 3, on processes to address impacts and staff involvement in those processes, requires companies to disclose:

• what processes it has in place to provide for or cooperate in the remediation of negative impacts on people in its own workforce (section 30). In other words, the companies don’t just report on material social issues raised, but also the processes they have in place to address them, with the input of their staff.
• the ways in which it offers staff structures or processes to proactively raise their concerns or needs (section 32 (b)), and 'how it assesses that people in its own workforce are aware of, and trust, these structures or processes' (section 33). Examples here could include providing information on confidential reasonable accommodations and support processes, complaints processes, or anonymised staff surveys concerning wellbeing, access and inclusion.

S1 – 4, regarding how companies act on social impacts, and manage both risk and opportunities for the business in these areas, requires the company to report on:

• both its general and specific approaches to addressing material negative impacts (section 33 (a)) and its initiatives aimed at contributing to additional material positive impacts (section 33 (b)). In other words, where specific disability-related impacts or opportunities have been identified, companies must report specifically on the initiatives or actions planned to address them, progress on initiatives in train (section 33 (c)) and their aims for continued improvement in the area (section 33 (d)).
• how they measure the effectiveness of those actions and approaches, which can be derived from internal or external auditing or verification…impact assessments, measurement systems, stakeholder feedback…and benchmarking (AR 38). This means that organisations must assess and highlight whether the actions they are taking are working and how they know that for sure. Examples of evidence to support this disclosure re disability could be engagement with the WIDE Framework (see article about WIDE in this issue) and links to a completed self-assessment against it.

S1-5, relates to setting, measuring, and reporting on specific metrics and targets (further outlined in detail in S1-6 to S1-17) concerning social impacts on the workforce, with an emphasis on:

• encouraging use of SMART targets by requiring information on the time-bound and outcome-oriented targets it may have set related to…reducing negative impacts and advancing positive impacts on its own workforce (section 44). So rather than reporting a target to increase the percentage of diverse groups in their workforces, businesses will be encouraged to disclose their target to ensure X percentage of the workforce are disabled employees by Y date.
• declaring the process and rationale for the targets set and how they are measured, including how the workforce has been engaged in the target-setting process and development of strategies to review and meet them (section 47).

From a disability-inclusion perspective, the most relevant specific metrics/targets which need to be set, measured and reported on under the ESRS include:

• S1-12: Persons with disabilities, where companies must report on the percentage of their own employees with disabilities (section 77), and the methodology for collecting the data.
• S1-17: Incidents, complaints and severe human rights impacts, where companies must disclose the number of employee complaints and work-related incidents of discrimination, including those on the grounds of…disability (section 102).

Conclusion: What are the implications for the CSRD in relation to disability inclusion?

One of the stated overarching aims of the ESRS S2 standard is to enable users of company reporting to understand the extent to which the company aligns with international and European human rights instruments, including the UN Convention on the Rights of Persons with Disabilities (UNCRPD). The depth and complexity of the reporting requirements will no doubt be a huge challenge for businesses to meet, but there is little doubt they will enable us to understand better how serious companies are about access and inclusion before we invest in them or buy their products.

In this article, we have taken a deep dive into the ESRS standard S1 concerning reporting requirements on social impacts on a company’s own workforce. In their totality, they require affected companies to report:

• detailed and specific information regarding the percentage of employees with a disability
• how the organisation is engaging with them to identify and improve accessibility in the workplace
• the specific and time-bound targets and goals they have, to make improvements on access and inclusion
• and the policies, strategies and initiatives they have, to support an inclusive workplace.

Interestingly, the majority of the S1 standards also similarly apply to S2 regarding workers in the value chain to varying degrees. And we barely have had an opportunity to touch on the S4 standard, which requires companies to look at negative social impacts of their products and services on their customers, which will make companies think more seriously about how accessible or otherwise their products are.

Our hope is that the CSRD and ESRS are not just compliance tools; they can be catalysts for a significant transformation in organisational approaches to access and inclusion.

Aligning corporate practices with these standards allows businesses to position themselves as leaders in sustainability and equity, which in turn will increasingly lead to a competitive advantage. The standards themselves increase this competitive advantage by including elements of the value chain in reporting requirements – in other words, companies will look to work with other companies with a positive record in these areas to support their own reporting. This will likely be particularly evident in public procurement processes.

By embedding disability inclusion into their core strategies, businesses can:

• Enhance Workforce Diversity: Implement comprehensive policies and initiatives to attract disabled talent, fostering an inclusive workplace culture, with the voices of disabled employees informing and driving positive changes.
• Promote Inclusive Supply Chains: Collaborate with suppliers and business customers to ensure equity extends beyond direct operations, offering the potential for these standards to also influence the practices of competing businesses not in scope of the ESRS.
• Drive Accessibility Innovation: Invest in universally designed products and services which are appealing and accessible to a broader customer base, capturing underserved markets and building brand loyalty.
• Deepen Consumer Relationships: Strengthen trust with disabled consumers and ethical investors, by promoting inclusion, prioritising accessibility and acting on feedback from disabled customers and staff to improve offerings.

By embracing the CSRD and ESRS, disability inclusion can evolve from an overlooked aspect of a corporate EDI strategy into a central pillar of sustainable and socially responsible business practices.

This approach not only benefits disabled customers and staff and signifies a business commitment to human rights but also fosters resilience and competitiveness in an increasingly sustainability-conscious global market.