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The roll-out of the Corporate Sustainability Reporting Directive (CSRD) marks a major milestone in social impact measurement and management. Unlike previous sustainability frameworks, the CSRD takes a bold step forward by mandating detailed disclosures on social impact, ensuring companies consider their social footprint. 

The European Commission (EC) is using the European Sustainability Reporting Standards (ESRS) S1 through S4 to achieve this goal. These standards aim to provide a comprehensive view of a company's social impacts and responsibilities, both within and beyond its immediate operations.

In this article, we will explore one of these four social standards, ESRS S4, which focuses on how a company’s products and services impact the people who use them. Whether you're just starting your social sustainability reporting journey or looking to enhance your existing practices, this blog will equip you with the knowledge needed to successfully navigate these new reporting requirements.

What is ESRS S4 exactly?

The ESRS S4 focuses specifically on how companies impact the people who use their products or services. Officially called “ESRS S4 Consumers and end-users”, the standard looks at how multiple social topics – from information transparency and personal safety to social inclusion initiatives and data privacy – impact these two groups.  

Before we go on, it’s worth breaking down exactly what the EC means when they say consumers and end-users.

• Consumers are individuals who buy, consume, or use goods and services for their personal use.
• End-users are individuals who ultimately use or are intended to use a particular product or service. 

The EC wants companies to identify both positive and negative impacts of their products or services on these two groups, consider how they are affected, and pay special attention to vulnerable groups or those at higher risk of harm.

This can be due to any number of factors from product safety and health effects to data security and grievance mechanisms. Here’s a more comprehensive list of topics which ESRS S4 covers: 

Product safety and health

• Product safety measures and monitoring
• Health impacts of products and services
• Consumer protection protocols
• Personal safety and security
• Protection of children

Data privacy and security

• Management of consumer data
• Privacy protection measures
• Data security protocols
• Freedom of expression
• Access to quality information

Social inclusion and accessibility

• Non-discrimination
• Social inclusion practices
• Accessibility of products and services
• Consideration of vulnerable groups
• Inclusive design practices

Marketing and communication

• Responsible marketing practices
• Clear communication channels with consumers

Risk management and accountability

• Impact assessment and management
• Grievance and remediation mechanisms
• Policy implementation for consumer-related risks and opportunities
• Measurable goals for improvement

How does ESRS S4 fit into CSRD? 

As one of the four social standards within the ESRS, ESRS S4 complements ESRS S1 (employees), S2 (workers in the value chain), and S3 (affected communities) to provide a comprehensive framework for social impact reporting.

What makes ESRS S4 particularly significant is its role in mandating transparency around consumer relationships through 69 distinct data points.

ESRS S4 is also particularly unique thanks to the CSRD’s double materiality perspective, which requires companies to consider not only how their activities affect consumers and end-users, but also how consumer-related issues might impact a company's financial performance.

As a result of this unique approach to materiality and the scope of topics covered, the CSRD is one of the most comprehensive social impact reporting frameworks in the world.

The importance of ESRS S4 for consumers and end-users

ESRS S4 transforms consumers from passive participants into active stakeholders in corporate sustainability. By mandating comprehensive reporting on consumer-related issues, the standard creates a feedback loop where consumer preferences and concerns directly influence business practices.

For the average consumer, this means unprecedented access to standardized, reliable information about the companies they choose to support, enabling more informed purchasing decisions that align with their values.

Companies must now also demonstrate their commitment to consumer interests through transparent reporting on customer satisfaction, complaint handling, and product sustainability features. This accountability mechanism empowers consumers to reward responsible businesses and incentivize positive change across industries.

The implementation of ESRS S4 also represents a crucial step in building lasting consumer trust. When businesses provide clear, comparable information about their consumer-related practices, they create a foundation for authentic relationships with their customers. 

This transparency not only helps consumers make better-informed choices but also encourages brand loyalty based on shared values and demonstrated responsibility. As sustainability becomes increasingly important to purchasing decisions, ESRS S4 provides the framework for businesses to showcase their commitment to society’s well-being.

The 6 disclosure requirements for ESRS S4 (and how to interpret them)

Strategy

Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders

ESRS 2 SBM-2 is a general disclosure requirement that focuses on stakeholder interests and views in relation to a company's strategy and business model. It's part of the broader ESRS 2 framework which covers general disclosures for sustainability reporting.

Think of it as the "voice of the consumer" requirement, essentially requiring companies to show how they're considering their consumers’ interests, views and rights in their business decisions. 

Companies reporting under ESRS S4 must show how they've applied the stakeholder engagement principles from SBM-2 to their consumer relationships, making ESRS 2 SBM-2 essentially the foundation that supports the more detailed consumer-focused reporting requirements in ESRS S4.

Disclosure Requirement related to ESRS 2 SBM-3 – Material impacts, risks, and opportunities and their interaction with strategy and business model

Similar to the above, ESRS 2 SBM-3 is a general requirement that acts as a bridge between a company's business strategy and its impacts on consumers. It requires companies to think deeply about two key things: first, how their current business model might be affecting consumers (both positively and negatively), and second, how consumer-related risks and opportunities might affect their business success. 

By linking business strategy directly to consumer impacts, SBM-3 helps ensure that consumer protection isn't just an afterthought but is built into the core of how companies operate and plan for the future.

Impact, risk and opportunity management

Disclosure Requirement S4-1 – Policies related to consumers and end-users

ESRS S4-1 focuses on the concrete policies companies need to have in place to protect and support their consumers. Think of it as the "rulebook" requirement – companies need to show they have clear, well documented policies that address all their major consumer impacts. 

What makes this requirement particularly important is that it's not just about having policies on paper; companies need to demonstrate how these policies actually work in practice and how they align with international standards like the UN Guiding Principles on Business and Human Rights. 

For example, if a company identifies that some of their consumers are particularly vulnerable (like children or elderly people), they need specific policies to protect these groups. The requirement also emphasizes human rights, requiring companies to show how they're respecting consumer rights and providing ways to address any problems that might arise.

Disclosure Requirement S4-2 – Processes for engaging with consumers and end-users about impacts

ESRS S4-2 is all about making sure companies have meaningful conversations with their consumers about how business activities affect them. Think of it as the "active listening" requirement – companies need to show they're not just talking at their consumers, but actively engaging with them (or their representatives) about both positive and negative impacts. 

This means having regular, structured ways to gather consumer feedback, whether that's through direct conversations, surveys, or working with consumer advocacy groups. Companies need to be especially careful to include vulnerable consumers who might need different ways to make their voices heard. 

The requirement also asks companies to show who's responsible for making sure this engagement happens and how they use consumer feedback to make real changes in their business. If a company doesn't have these engagement processes in place yet, they need to admit this and explain when they plan to set them up.

Disclosure Requirement S4-3 – Processes to remediate negative impacts and channels for consumers and end-users to raise concerns

ESRS S4-3 aims to make sure companies have clear ways to fix problems when things go wrong and make it easy for consumers to raise concerns. Think of it as the "problem-solving" requirement – companies need to show they have formal systems in place to handle consumer complaints and to provide solutions when their products or services cause issues (referred to as “grievances” by the EC). 

This isn't just about having a customer service hotline; companies need to prove they have proper processes to investigate problems, provide appropriate remedies, and make sure consumers feel safe reporting issues without fear of retaliation. 

For example, if a product has a safety issue, companies need to show how they'll fix it and make things right for affected consumers. They also need to track how accessible these solutions are, whether they actually work and make improvements based on consumer feedback. 

Again, if a company doesn't have these systems in place yet, they need to be honest about it and provide a timeline for when they'll set them up.

Disclosure requirement S4-4: Taking action on material impacts

ESRS S4-4 is about turning plans into real action when it comes to consumer impacts. Think of it as the "making it happen" requirement – companies need to show exactly what they're doing to prevent or fix negative impacts on consumers, and how they're creating positive ones. 

This isn't just about having good intentions; companies need to demonstrate concrete steps they're taking, like changing product designs, improving marketing practices, or updating sales approaches. They also need to show they're putting real resources (like money and staff) behind these efforts and tracking whether their actions are actually working. 

For example, if a company identifies that their marketing might be harmful to vulnerable consumers, they need to show what specific changes they've made to fix this and prove these changes are effective. 

The requirement also asks companies to be honest about how they handle situations where business pressures might conflict with consumer protection, ensuring transparency about these challenging decisions.

Metrics and targets

Disclosure requirement S4-5 – Targets related to managing negative impacts, advancing positive impacts, and managing material risks and opportunities

ESRS S4-5 is about setting clear, measurable goals to improve how companies impact their consumers. Think of it as the "goal-setting" requirement – companies need to create specific, time-bound targets that show how they'll reduce negative impacts on consumers, increase positive ones, and manage related risks and opportunities. 

For example, a company might set a target to improve product accessibility for disabled consumers by 50% within two years. What makes this requirement particularly important is that it's not just about setting targets in isolation, companies need to show they've involved consumers or their representatives in creating these goals and tracking progress. 

They also need to demonstrate how they learn from their performance and make improvements based on what works and what doesn't. This creates a cycle of continuous improvement that keeps companies accountable to their consumer-focused commitments.

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Practical steps for implementing ESRS S4 disclosure requirements

As we've explored throughout this guide, ESRS S4 represents a fundamental shift in how companies approach and report on their relationships with consumers and end-users. While the requirements may seem demanding, they ultimately create opportunities for businesses to build stronger, more transparent relationships with their customers while driving sustainable business practices.

1. Understand your reporting obligations under ESRS S4

Companies with fewer than 750 employees will benefit from additional flexibility in implementing ESRS S4 and other sustainability reporting requirements. The European Commission (EC) has introduced a phase-in approa that allows these smaller organizations to delay reporting on certain data points for up to two years. 

This includes postponing all disclosure requirements related to consumers and end-users (ESRS S4), along with other challenging areas like biodiversity reporting and workers in the value chain. 

This strategic delay recognizes that smaller companies often face disproportionate costs and resource constraints when implementing new reporting requirements. The phase-in period gives these businesses valuable time to build proper sustainability tracking systems and spread out initial compliance costs while maintaining reporting quality.

2. Conduct a double materiality assessment

To effectively implement ESRS S4, companies need to conduct a double materiality assessment focused – among other things – on consumer-related issues. For ESRS S4, the double materiality assessment focuses on three sub-topics:

• Information-related impacts for consumers and/or end-users: How you handle customer data and information - both how it affects your business (like avoiding fines) and how it affects your customers (like keeping their private details safe).
• Personal safety of consumers and/or end-users: How your customers safe while using your products or services, which means checking for risks that could harm people and making sure you have good safety processes in place
• Social inclusion of consumers and/or end-users: Whether everyone can access and use your products or services fairly, regardless of who they are, and how this affects both your business success and your customers' experiences.

For each sub-topic, evaluate whether your company has identified any impacts, risks, and opportunities (IROs) associated with it. Assessing the materiality of these IROs will help determine if ESRS E4 qualifies as a material topic.

3. Develop and communicate relevant policies

• Document who your key stakeholders are, how you engage with them, and how you use their feedback in your decision-making process.
• Analyze and record how stakeholder interests and views relate to your company's strategy and business model.
• Detail any changes made or planned to your strategy or business model based on stakeholder input, including clear timelines and expected impacts.
• Establish clear processes for informing management bodies about stakeholder views and sustainability-related impacts.
• Document how workforce interests, views, and rights are specifically considered and integrated into company strategy and business model decisions.
• Clearly outline how you will enforce these policies, who is responsible for implementation, and what systems are in place to monitor compliance.
• Ensure that these policies are available and accessible to key internal and external stakeholders.
  

4. Engage with consumers and end-users

Under S4-2, companies must detail their engagement processes and methods for understanding consumer impacts. This includes:

• Documenting their formal processes for collecting consumer feedback, including all consultation methods, communication channels, and procedures for assessing impact.
• Providing clear evidence of their engagement activities, showing how consumer feedback is integrated into operations and what response protocols are in place.
• Outlining their quality assurance procedures, including how they verify engagement effectiveness and implement continuous improvement processes.
  

5. Establish grievance mechanisms

Under S4-3, companies should show that they have established grievance mechanisms to handle complaints and grievances by customers and end-users. This includes by:

• Document their formal grievance mechanisms, including clear complaint procedures, response timelines, and appeal systems for consumers to raise concerns.
• Detail their remediation processes, showing how they assess impacts, implement corrective actions, and monitor the effectiveness of solutions.
• Provide regular reporting on how they handle complaints, including statistical analysis of issues raised, resolution outcomes, and preventive measures implemented to avoid future problems.

6. Set targets and monitor progress

Under S4-5, companies must establish and report on specific targets related to consumer impacts. This includes:

• Defining clear consumer-related targets that include both quantitative and qualitative measurements, establishing baselines and specific timelines for achievement.
• Outlining their methods for monitoring progress, including how they collect data, track performance, and report on target advancement at regular intervals.
• Documenting who is responsible for meeting these targets, how performance is evaluated, and how this information is communicated to stakeholders, including procedures for corrective actions when targets aren't met.
  

7. Implement actions and assess effectiveness

Under S4-4, companies must document specific actions taken to address material impacts on consumers and end-users. This includes:

• Detailing specific actions they've taken to address consumer impacts, including the resources allocated, implementation timelines, and who's responsible for each action.
• Documenting their risk management approach, showing how they identify, mitigate, and monitor material risks that could affect consumers and end-users.
• Demonstrating how they measure the effectiveness of their actions through clear performance indicators and regular review processes that track progress over time.
  

8. Integrate into risk management and strategy

Companies must also show that they have understood, and are taking action on, the risks identified to consumers and end-users in their double materiality assessment. That includes by:

• Evaluating and documenting how different consumer groups might be at risk and what opportunities exist to better serve them.
• Clearly showing if (and how) you've changed your business strategy and model based on what you've learned about your impacts on consumers.
• Setting up a system to track, monitor, and report how your business affects consumers throughout your entire value chain.

Select the right software for your ESRS S4 reporting

To enhance compliance with ESRS S4 requirements, organizations should implement advanced tools and software for efficient data collection, analysis, and reporting on the impacts on end-users and consumers.

By automating data processes and integrating analytics, organizations can make informed, proactive decisions that improve water management practices and support sustainability goals, ultimately simplifying the reporting process and enhancing transparency. 

Coolset helps users achieve CSRD compliance by simplifying the reporting process and enhancing transparency in reporting data points. Try out our software below, or book a demo here.