Assesing ESG Risks for Sustainable Finance: An Integrated ESRS S1 Model of Organisational Social Risk, Double Materiality and Assurance Readiness
Purpose: The aim of this article is to identify and systematise organisational social risks in accordance with the ESRS S1 standard and to analyse how existing diagnostic methods can support their assessment, monitoring, documentation and reporting. The article also seeks to explain how organisational social risks may become ESG risks relevant to sustainable finance by affecting financial materiality, access to finance, the cost of capital, ESG ratings and investor confidence. Design/Methodology/Approach: The study adopts a structured qualitative research design combining regulatory document analysis, a critical review of peer-reviewed literature and a criteria-based comparative analysis of diagnostic methods. The analytical corpus comprised ESRS S1 and related EU regulations and implementation guidance, together with publications on SO-LCA, human rights due diligence, psychosocial risk assessment, HR and occupational health and safety data, grievance records, external ESG ratings and sustainability assurance. The sources were coded against nine criteria derived from ESRS S1 and double materiality requirements: thematic and workforce coverage, inclusion of workers’ perspectives, identification of causes and vulnerable groups, distinction between actual and potential impacts, assessment of severity and likelihood, identification of financial effects, monitoring capacity and evidentiary usefulness. The comparison was then integrated through framework synthesis into a six-stage analytical architecture corresponding to recurrent regulatory and evidentiary requirements identified across the analysed sources. Findings: The regulatory content analysis shows that ESRS S1 covers a broader range of organisational social risks than employment conditions and occupational health and safety alone. The criteria-based comparison indicates that SO-LCA, HRDD, psychosocial tools, HR and occupational health and safety data, grievance records and external ESG ratings perform complementary functions, but no method independently covers all diagnostic and evidentiary requirements derived from ESRS S1. Framework synthesis therefore supports a six-stage analytical architecture combining scoping, impact identification, double materiality assessment, financial transmission assessment, management response and monitoring. These findings are analytical and do not constitute evidence of the framework’s empirical effectiveness. Practical implications: The proposed analytical framework can guide organisations in structuring the diagnosis of social risks, linking identified impacts with potential financial transmission pathways, organising ESRS S1 disclosures and assembling documentation relevant to sustainability assurance. Its six stages were derived by mapping the functions of the analysed diagnostic methods against regulatory requirements that were not fully covered by any single method. The framework may also help organisations prepare information for investors, lenders and other financial-market participants assessing exposure to ESG risk. Originality value: These uses remain proposed applications until the framework is empirically tested in organisational settings.