ESRS S1-5 Workforce Targets
ESRS S1-5 requires companies to disclose targets related to managing material impacts on their own workforce — including diversity targets, H&S targets, and wellbeing targets. Target-setting creates accountability and transforms workforce disclosures from static snapshots into dynamic performance management tools.
ESRS S1-5 requires companies to disclose targets related to managing material impacts on their own workforce — including diversity targets, H&S targets, and wellbeing targets. ESRS S1-5 requires disclosure of any time-bound and outcome-oriented targets that the company has set for managing material impacts on its own workforce — and progress against those targets.
What ESRS S1-5 requires
ESRS S1-5 requires disclosure of any time-bound and outcome-oriented targets that the company has set for managing material impacts on its own workforce — and progress against those targets.
For each target disclosed, ESRS S1-5 requires: the topic the target relates to (H&S, diversity, pay equity, etc.); the baseline value and year; the target value and the year by which it is to be achieved; any milestones along the way; the current year performance against the target; and an explanation of any significant variance from the expected trajectory.
Target types most commonly disclosed under S1-5: Diversity targets — percentage of women in management, leadership team gender balance, ethnic or nationality diversity; Health and safety targets — TRIR reduction targets, zero fatality ambition, H&S management system coverage; Pay equity targets — gender pay gap reduction, living wage coverage, CEO pay ratio management; Training targets — minimum training hours per employee per year, leadership programme participation; Wellbeing targets — employee engagement score, absence rate, mental health support coverage.
Not required — but expected: ESRS S1-5 does not mandate that companies set targets. Where no targets exist, disclose this — and where material workforce impacts are identified but no targets are set, expect assurer and investor questions about the absence of targets for material topics. For companies without existing workforce targets, first CSRD reporting is the forcing function to establish them.
Setting credible workforce targets
Workforce targets that are credible, measurable, and time-bound serve multiple purposes — governance accountability, investor communication, and internal culture change. Targets that are vague or unachievably ambitious do more harm than good.
SMART target framework: Specific (exactly what will be achieved — not 'improve diversity' but 'increase women in senior management to 40%'); Measurable (quantified, with a defined data source — S1-6 senior management gender count); Achievable (realistic given current trajectory and planned interventions); Relevant (connected to a material workforce impact identified in the double materiality assessment); and Time-bound (a specific year, not 'by the long term').
Baseline establishment: Targets require a baseline — the starting point from which progress is measured. For first-year CSRD reporters, the first report year data becomes the baseline for future targets. Companies that have been collecting workforce data voluntarily have historical baselines available — these enable more ambitious targets anchored to a longer trend.
Interim milestones: Long-term targets (5–10 year) should have annual or biennial interim milestones — allowing year-on-year accountability rather than waiting for the target year to assess progress. For a 40% women in management target by 2030, interim milestones might be 35% by 2027, 38% by 2029.
Ambition calibration: Setting targets below current trajectory is not credible. Targets should represent genuine stretch — achievable through specific planned interventions, but requiring effort and commitment to achieve. Benchmark against sector peers — if your sector is at 35% women in management and you target 40%, that is credible ambition. Targeting 30% when the sector average is 35% is regressive.
Progress tracking and variance explanation
The accountability value of S1-5 targets comes from annual progress tracking — disclosing not just the target but how actual performance is tracking against it.
On-track disclosures: Where performance is on track, confirm this with the specific metric value and compare to the expected trajectory. 'We achieved 36% women in senior management in 2026, on track toward our 40% by 2030 target (interim milestone: 35% by 2027)' is a clear, accountable disclosure.
Off-track disclosures: Where performance is behind target, explain the variance honestly — the reasons it occurred and the actions being taken to return to trajectory. Off-track performance explained with genuine root cause analysis and credible catch-up plan is better received than a target missed without explanation. Common reasons for workforce target misses: unexpected workforce reductions that disproportionately affect the target population; recruitment market tightness limiting pipeline; structural barriers identified through analysis requiring longer to address.
Target revision: Where material changes in business circumstances (major restructuring, sector-wide labour market shifts, acquisition) make an original target no longer relevant, update the target with clear disclosure of the rationale. Arbitrary target revisions to avoid showing underperformance are not credible — assurers and investors distinguish between legitimate revisions and target gaming.
Linking targets to governance: Credible S1-5 targets are connected to governance accountability — included in executive remuneration (GOV-3), reported to the board regularly, and subject to management accountability mechanisms. Targets that appear only in the sustainability report but have no connection to management incentives or governance accountability lack credibility.
Frequently asked questions
Do we need to set targets for every material S1 topic?
ESRS S1-5 requires disclosure of targets where they exist — it does not mandate that targets must be set for all material topics. However, where significant adverse impacts are identified (material H&S risks, material pay equity gaps) but no targets are set to address them, assurers and investors will question the absence. Best practice sets at least aspirational targets for each material S1 topic, even where the precise trajectory is uncertain.
Can we use relative targets (percentage improvement) rather than absolute targets?
Yes — both absolute targets (achieve X%) and relative targets (reduce by Y% from baseline) are acceptable under S1-5. For metrics where absolute levels vary significantly by business scale (training hours, H&S incidents), relative improvement targets often make more sense than absolute targets. Disclose both the baseline absolute level and the relative target with sufficient context for stakeholders to assess ambition.
Our diversity target was set before a major acquisition that significantly changed the workforce composition — do we need to revise it?
Yes — where a major acquisition materially changes the workforce composition, review and if necessary revise targets with clear disclosure of the rationale. An acquisition that brings in a workforce with different diversity characteristics changes both the baseline and the trajectory. Reset targets using the combined post-acquisition workforce as the new baseline, with a clear narrative explaining the revision.