UNICEF published three guidance briefs for companies on how to apply the European Sustainability Reporting Standards (ESRS) when reporting on their impacts, risks and opportunities on children’s rights (October 2024). The guidance briefs can be used together or individually, and are complementary to the European Financial Reporting Advisory Group (EFRAG)’s implementation guides. The guidance briefs provide examples of ESRS requirements related to impacts on children’s rights and some practical examples of how to report impacts on children and other persons or groups in vulnerable situations.
Human Level’s Take
- Companies significantly impact children’s rights in ways that often go beyond the obvious concerns, such as child labour. For instance, workplace policies that hinder a healthy work-life balance for parents and carers can reduce the quality of care, attention and resources that children receive. Similarly, when companies undertake large infrastructure projects — such as building dams — the resulting displacement of communities can mean that children must travel farther for essentials like school and water, which increases their vulnerability to risks such as violence and limits their access to education.
- Despite these realities, many companies overlook children as a critical and uniquely impacted stakeholder group. The consequences of neglecting children’s rights can be substantial, not just for children but for businesses as well. Companies found to employ or benefit from child labour can face significant financial fallout, from investor divestment and consumer boycotts to legal repercussions like fines and sanctions. On the flip side, companies that proactively support child-friendly policies, such as offering reliable childcare options, often see gains in employee recruitment, retention and productivity.
- The implementation of the European Sustainability Reporting Standards (ESRS) therefore provides a golden opportunity for companies. The ESRS recognise children as a vulnerable group and companies can apply the ESRS with a child rights-based lens. There are a number of specificities to consider, including when it comes to how to engage meaningfully, appropriately and ethically with children and how to prioritise (e.g. children are more vulnerable to health risks from exposure to pollution and toxins when compared to adults — which can lead to lifelong consequences and harm). As the briefs make clear, “[e]nsuring adequate and relevant reporting on children’s rights will enable companies to better identify their impacts and opportunities regarding children, prevent adverse impacts and build sustainable outcomes for children, communities and their business.”
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- Children as stakeholders at heightened risk of adverse impact: The EU Corporate Sustainability Reporting Directive (CSRD) and the ESRS require companies to recognise “persons in vulnerable situations” as a distinct category of stakeholder that must be given additional consideration in the reporting process. Children — defined as being below the age of 18 years under the UN Convention on the Rights of the Child — fall under the category of vulnerable groups due to inherent characteristics, including their age, development and size. Thus, companies should consider children as a key stakeholder group and disclose impacts, risks and opportunities on them under the ESRS.
- Children are impacted by business in various ways: Companies often exclusively link business impacts on children’s rights to child labour. While this is a serious child rights issue and a material issue for many companies, this narrow focus does not capture the many ways in which business affects children. For instance, business facilities and services can raise serious child safeguarding and protection concerns. An example is a social media company that sets children’s social accounts to public by default. This means that children can be contacted by anyone and this exposes them to risks of abuse, exploitation and violence. Another instance is when caregivers’ working conditions are poor, which affects their abilities to provide the care, attention and essential resources that children need to live and thrive. In addition, children are impacted by business activities in the communities and environments where they live and play. For instance, if a company has resettled communities due to the building of a dam, children must now walk longer distances to go to school and to fetch water for their families. This exposes them, especially girls, to risks of violence and losing access to education.
- Children’s rights and double materiality: Under the ESRS, companies are required to disclose information that is relevant to their financial performance (financial materiality) and their environmental and social impacts (impact materiality) — together known as double materiality. Children’s rights has both financial and impact materiality for companies. In relation to financial materiality, for instance, support for childcare has been linked to financial benefits for businesses, including improving recruitment, retention and productivity. Conversely, companies that sexualise and objectify children in marketing materials can face legal (e.g., fines and sanctions) and reputational risks (e.g., consumer controversies). In addition, companies that have been found to employ child labour face divestment from investors, boycotts from consumers and legal consequences like fines and sanctions.
- Taking a child rights lens to the materiality assessment: Under the ESRS, the starting point for the materiality assessment is the assessment of impacts, which should be aligned with the human rights due diligence process under the UN Guiding Principles on Business and Human Rights (UNGPs). Under the ESRS, this assessment includes:some text
- Understanding the context and definition of the stakeholder engagement strategy. In the context of child rights, companies should engage with children, their representatives and other stakeholders on children’s rights. When consulting directly with children, businesses need to carry out engagement meaningfully, appropriately and ethically. This means safeguards should be implemented to ensure children are adequately protected during consultation.
- Identifying the list of potential material sustainability matters and impacts, risks, and opportunities. A key first step is for companies to assess adverse impacts related to groups in vulnerable or disadvantaged situations, including children. They can also refer to the list of ESRS sustainability matters (see ESRS 1, AR16).
- Determining the final list of material matters based on an assessment of the materiality of impacts, risks and opportunities. For negative impacts, this process involves applying the scope, scale and irremediable nature of the impact under the UNGPs. For positive impacts, the criteria are scale, scope and likelihood of impact. Of principal importance is considering the irremediability of impacts on children. One example is adverse environmental impacts on children. Children are more vulnerable than adults to toxic chemicals in air, water and food because they are still growing and developing so the resulting health harms can have lifelong consequences. In addition, it is important to obtain stakeholder engagement to validate the final list of material impacts.
- Reporting on children’s rights under the social standards: Reporting on children’s rights should follow the general approach laid out in the ESRS 2 and social topical standards, including disclosure of the following (which has been taken directly from the guidance brief): some text
- Whether and how the impact, risk or opportunity was identified as material, and how it interacts with the company’s strategy and business model
- Governance and strategy to monitor, manage and oversee the impact, risk or opportunity
- Stakeholder engagement, and how consultation informs the company’s strategy and materiality assessment
- Policies to manage the impact, risk or opportunity
- Action taken, planned or underway to prevent or mitigate negative impact
- How the effectiveness of actions is monitored, including metrics and targets
- Channels to raise concern and remediation efforts where negative impacts are identified
- The guidance briefs delve into examples of material child rights issues, including child labour and young workers; working conditions for parents and caregivers which have a direct impact on the health, development and well-being of children; impacts on children in communities; and impacts on children in relation to the safety of products and services and responsible marketing practices.
