Shift welcomes the publication by the ISSB of a draft Climate standard for public consultation. Our organizational expertise is in the human dimensions of sustainability, including as they relate to climate change and climate change strategies.
July 2022 |
Comments by Shift on the ISSB Exposure Draft (General Requirements)
Climate change can have knock-on effects across regions and sectors, through interconnected socioeconomic and financial systems. The Bank for International Settlements (BIS) describes climate change as “a new type of systemic risk that involves interacting, nonlinear, fundamentally unpredictable, environmental, social, economic and geopolitical dynamics”. It goes on to state: “With the complex chain reactions between degraded ecological conditions and unpredictable social, economic and political responses, with the risk of triggering tipping points, climate change represents a colossal and potentially irreversible risk of staggering complexity.”
It is in light of these important interconnections that we submit these comments to the ISSB to urge that the draft standard be revised to reflect a more holistic picture that integrates the human dimensions and implications of climate change, climate mitigation, and climate adaptation. Without this, we will not only fail to achieve a just transition to carbon-neutral economies but will see continuing barriers to the success of undertakings climate change strategies, with consequences for business and the providers of capital, among others.
Shift welcomes the opportunity to contribute our perspective on the Exposure Draft published by the International Sustainability Standards Board (ISSB): IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information.
July 2022 |
Comments by Shift on the ISSB Exposure Draft (Climate-Related Disclosures)
This document contains our comments on the former in which we offer inputs from the perspective of the leading center of expertise on the UN Guiding Principles on Business and Human Rights. The UNGPs are the global authoritative standard concerning how companies impact employees, workers, communities, and consumers.
Shift looks forward to continued engagement with the ISSB as it carries out is important and timely work.
Shift welcomes the publication of the first draft set of European Sustainability Reporting Standards and commends the European Financial Reporting Advisory Group on producing a rich and important set of draft standards in a short period of time. While we are responding separately to a number of the survey questions circulated as part of the consultation process, we recognize that these do not allow for the full expression of views on the draft standards and therefore submit this letter also to complement our survey responses. In it we address issues related to:
The architecture of the cross-cutting standards
The articulation of the materiality assessment process
Providing clarity on the central role of due diligence
Focusing on the materiality process rather than ‘rebuttable presumptions’.
Alignment with international standards and the definition of value chains
The relevance of governance and business models to information on due diligence
Relevance of governance disclosures to alignment with due diligence standards
Relevance of business models as source of impacts in the context of due diligence
The significance of engagement with affected stakeholders
Value of clearly distinguishing affected stakeholders and their particular relevance
Need for cross-cutting disclosures on engagement with affected stakeholders
The value of the architecture of the social standards
Value of division into standards based on stakeholder group
Need for performance metrics for all stakeholder groups in future standards
According to the 2022 World Inequality Report, the richest 10% of the global population takes 52% of global income and owns 76% of all wealth, while the poorest half of the population earns just 8.5% of global income and 2% of wealth. There are many historical, structural and political causes of such high levels of inequality. But one important factor is undoubtedly the role that business has played – over decades of globalization and deregulation – in externalizing costs and risks onto the most vulnerable workers, communities and consumers.
Prince Zeid has a longstanding and globally renowned trajectory of leadership and commitment to advancing respect for human rights. He served as the United Nations High Commissioner for Human Rights from 2014-2018, as well as Jordan’s Permanent Representative to the UN, Ambassador to the US, and as the first president of the governing body of the International Criminal Court (ICC), among other leadership roles.
He is currently the CEO and President of the International Peace Institute and the Perry World House Professor of Practice of Law and Human Rights at the University of Pennsylvania Carey Law School. He is also a member of The Elders, an independent group of global leaders working together for peace, justice and human rights, first established by Nelson Mandela in 2007. He has been recognized globally as a leading defender of universal human rights, receiving the Stockholm Human Rights Award, the Netherlands’ Human Rights Tulip prize, and Foreign Policy magazine named him 2018 Diplomat of the Year.
Prince Zeid succeeds Shift’s late founding Chair, Professor John Ruggie, author of the UN Guiding Principles on Business and Human Rights. Prince Zeid was High Commissioner for Human Rights at the time the Guiding Principles were endorsed by the UN in 2011. On taking up the role of Shift’s Chair, Prince Zeid said:
“The unanimous endorsement of the Guiding Principles in 2011 represented a watershed moment in changing the understanding of companies’ responsibility for the negative impacts that business activities can have on people. For a decade now, Shift has worked relentlessly to embed the ethos of the UNGPs in the way business gets done, with the focus where it must always be – on delivering better outcomes for the most vulnerable workers and communities. I am delighted to take up the role of Chair of Shift’s Trustees at a time when we see so much growth in the appetite and need for the organization’s work and leadership, not least as regulators, legislators, investors and financiers become more attuned to their own roles in incentivizing rights-respecting business practices, including as an essential component of a Just Transition to carbon neutral economies. I look forward to working with the Board and the management team to seize these growing opportunities to deliver on the promise of the UN Guiding Principles.”
Prince Zeid Ra’ad Al Hussein Chair of Shift
For the past three years, Shift has worked closely with Prince Zeid in strategic partnerships to advise global sports bodies––including the International Olympic Committee and the Féderation Internationale de l’Automobile ––on their responsibility to respect human rights under the UN Guiding Principles.
Shift’s President and Co-Founder, Caroline Rees, said:
“We could not be more thrilled to welcome Prince Zeid to the Shift Board. This is an exciting time for Shift as we start upon our second decade of work, taking forward the tremendous legacy of our founding Chair, John Ruggie. It is a time of burgeoning developments in the field of social sustainability, with growing legislation, reporting standards, investor engagement and business leadership now rightly focused on companies’ responsibility to respect human rights. It is therefore a particular privilege and delight for all of us in the Shift team that we get to embark on this new era with Zeid’s wise stewardship at the helm of our Board. His extraordinary international experience, professional achievements and personal authority and commitment in advancing human rights will bring fresh insights, ideas, opportunities and energy to our mission.”
Caroline Rees President and Co-Founder of Shift
Shift is a non-profit, mission-driven organization, working across all continents and sectors to challenge assumptions, push boundaries and redefine corporate practice in order to build a world where business gets done with respect for people’s dignity. Shift is headquartered in New York City. To learn more, visit shiftproject.org
Professor Erika George is the Director of the Tanner Humanities Center and a Professor of Law at the University of Utah. She joined Shift’s Board of Trustees in February 2022.
In this conversation with Shift’s Communications Lead, Daniel Berezowsky, Professor George speaks about the evolution that she has seen across the business and human rights movement over the years, the relevance of investors as key agents of change, her interest in the recognition of the human right to a clean and healthy environment, and considerations on how companies can revisit the role they are playing to tackle the structural barriers that lead to discrimination on the basis of race.
Shift’s David Vermijs has been appointed to the newly-constituted Sustainability Reporting Board of the European Financial Reporting Advisory Group (EFRAG). EFRAG is developing corporate sustainability reporting standards for the European Commission for the implementation of the new Corporate Sustainability Reporting Directive (CSRD). Once updated, the CSRD will require approximately 50,000 companies to report on their environmental, social (including human rights) and governance performance from both an impact and financial materiality perspective, in a management report that is assured. Shift issued its position on the draft CSRD in May 2021.
David is one of the representatives of civil society organizations appointed to the Board, together with Filip Gregor of Frank Bold, among others. The EFRAG Sustainability Reporting Board will be responsible for all sustainability reporting positions of EFRAG including technical advice to the European Commission on the draft EU Sustainability Reporting Standards and amendments to Standards. The due process includes considering the technical advice provided by EFRAG Sustainability Reporting Technical Expert Group, which is appointed by the Board.
The target date for full implementation of the new EFRAG structure is 31 March 2022. Around this date the project work on the development of draft EU Sustainability Reporting Standards conducted by the EFRAG Project Task Force on European Sustainability Reporting Standards (PTF-ESRS), will be handed over to the permanent structure.
David has worked as a member of the PTF-ESRS over the past eight months, helping lead the development of draft social reporting standards. Recently, the draft working papers for consideration by the full PTF for the standards on Workers in the Value Chain, Affected Communities and Consumers and End-users were published. In May 2022, revised exposure drafts will be issued for public comment. Shift is a “co-construction” partner to EFRAG.
To learn more about the work that Shift does to help shape the rules that drive businesses to respect human rights, visit our Standards page.
Thank you very much to MEPs Heidi Hautala and Lara Wolters for the invitation to be with you all today, and congratulations to the Commission for taking on this challenge and to Commissioner Reynders in particular for his leadership.
March 2022 |
Shift’s Analysis of the EU Commission’s Proposal for a Corporate Sustainability Due Diligence Directive
The launch of the Commission’s Proposal for a Corporate Sustainability Due Diligence Directive is a truly pivotal moment in our progress towards markets that require and reward sustainable business practices. It builds on the efforts of many stakeholders to advance greater respect by business for people and planet since the adoption of the UN Guiding Principles and the OECD Guidelines over a decade ago.
As the architect of the UNGPs and our founding chair, John Ruggie always said, “the GPs are not merely a text; they were intended to help generate a new regulatory dynamic in which private and public governance systems play mutually reinforcing roles and move us towards a more effective global regime.” In the last few years, we have seen the public regulation side of this dynamic start to advance at the national level – particularly but not only in Europe, creating the need for the EU to help level the playing field on due diligence. The Commission has championed this initiative, as have leaders in the European Parliament, in individual member states, in civil society and in the business and investor community.
As the last week has demonstrated, the EU is a powerful force when it stands up for its values – including respect for the fundamental dignity of those who are vulnerable or whose rights are threatened. At its core, the EU is a market-oriented project; so it is vital that the rules of that market fully reflect and reinforce EU values, including on human rights. Given the scale of the challenges facing us in relation to climate change and global inequality, we need this market alignment more urgently than ever. That is why it is so important not just to get this Directive through (though we certainly need to do that), but to get it right.
The Directive’s stated ambition is to ensure that companies in the single market contribute to sustainable development by preventing and addressing adverse impacts in their operations and value chains. Done right, the Directive is an opportunity to scale quality due diligence processes focused on the most severe human rights and environmental risks; to encourage the creative use of leverage by companies to tackle these risks; to enhance internal governance on sustainability; and to expand pathways to remedy for those harmed. But to seize these opportunities, the Directive must be more firmly grounded in the international standards on sustainability due diligence, the GPs and OECD Guidelines, which EU member states have endorsed and which are informing global developments.
Today, I want to highlight 3 key concepts from the international standards that Shift believes need to be better embedded in the Directive if it is going to meet its own objectives and more clearly align with those standards. The 3 concepts are: Severity, Leverage, and People. I’ll take each in turn.
The Directive needs to use severity of risk to people as the organizing logic for due diligence, not what is closest or easiest for business to address.
Limiting the scope of due diligence on business relationships to a set of narrowly defined relationships – whether that is by tiers in the supply chain or by characterizing them as ‘established business relationships’ – risks creating perverse incentives. It encourages companies to focus on relationships that are important to the business or where the business has existing leverage, but which are not necessarily the source of greatest sustainability risks. And it can even encourage companies to game these definitions to avoid business relationships coming into scope. That’s why states did not adopt that logic in the UN Guiding Principles.
The Commission is rightly concerned about making due diligence manageable for business. The good news is that the international standards already do that, and the past decade of practice shows us how: by prioritizing attention to the most severe risks regardless of where in the value chain they occur and expecting companies to take reasonable steps to use and build leverage to address them.
To make this work, the Directive needs to separate the scope of the duty to do due diligence from the scope of civil liability. Administrative supervision and civil liability are both essential forms of enforcement and we welcome the inclusion of both in the draft. But they are most effective when used in a complementary way. So, through administrative oversight, the Directive can encourage due diligence to the full scope of the value chain, with prioritization based on severity. Then through civil liability, it can provide for remedy for harms in a narrower set of prescribed business relationships, for example established business relationships. Indeed, this complementary approach is what the Parliament itself has proposed. For as long as we continue to tie the scope of due diligence to the scope of liability, we will continue to debate where to draw arbitrary lines in the value chain that limit due diligence, rather than debating how best to incentivize the allocation of corporate resources towards the most severe risks.
The Directive needs to rely less on what is easiest to measure and more on what is meaningful in demonstrating and assessing corporate compliance. In other words, it needs to focus less on contracts and audits, and more on leverage.
There can be no doubt that after the last thirty years, the weight of evidence shows that ‘command and control’ approaches to managing human rights, including labor rights, risks in global value chains have limited impact. At the same time, they generate significant costs both for companies relying on these policing-style approaches but also for business partners that are subject to them. A clause in a contract can be an essential foundation for leverage – but it is only a foundation.
Instead, the Directive should require companies to look at their own potential contributions to generating risks to people – particularly purchasing practices. And it should expect companies to use the full range of approaches to leverage to address the most severe risks, from commercial to capacity-building to collaboration with peers, NGOs and wider multistakeholder initiatives. Companies should target their efforts where they matter most rather than taking a uniform approach to all business relationships regardless of their risk profile.
Importantly the Directive does stress the role of the Board in overseeing due diligence and ensuring that its results inform corporate strategy. This is very positive; we believe it can go further in specifying additional aspects of the governance of sustainability risks that are both measurable and meaningful in assessing a company’s seriousness in this area, such as whether the Board approves high-level targets for human rights and environmental risks, beyond climate targets alone.
The Directive needs to put people, and specifically affected people, more clearly at the heart of sustainability due diligence.
Meaningful engagement with affected stakeholders or their legitimate representatives, including unions, is essential to what makes due diligence under the international standards effective in practice. And it is what differentiates it from transactional due diligence. As John Ruggie said, “you are not looking to buy a piece of property and wanting to make sure there is title to it; you are undertaking a long-term relationship with people whose lives, opportunities and activities you can affect”.
While it may seem challenging to translate this into a legally binding duty, there are several clear opportunities to do so in the draft. The first way is by integrating a requirement forproactive engagement with affected stakeholders into key moments in the due diligence process, particularly during identification and prioritization of impacts and in tracking effectiveness. This would complement the engagement that occurs through complaints procedures, which Commissioner Reynders highlighted, but which is purely reactive in nature. A second way is by going beyond the narrow example of financial compensation to adopt a human rights understanding of remedy, the many forms it can take and the many ways in which companies can play a role in enabling it, starting by asking those affected what would put things right.
So, at Shift, we want to see even more focus on severity, leverage and people. We’ve produced a fuller analysis of the proposal which explains these points in detail and also highlights concerns about the scope of companies covered and about special carve-outs for the financial sector, which you can find here.
In conclusion, we believe this is an opportunity with few parallels. We greatly welcome the Commission’s initiative, and we look forward to working with all stakeholders as the debate moves forward to strengthen the Directive in line with its own ambitious aims and with international standards.
In January 2022, Shift’s Rachel Davis was interviewed by Marina Schweizer (Deutschlandradio) in the lead to the Beijing 2022 Winter Olympic Games. The conversation addressed the expectation that exists for global sports bodies – like the International Olympic Committee and FIFA – to respect human rights, under the UN Guiding Principles on Business and Human Rights; the scope of the risks that they need to consider; and an approach to due diligence as part of organizing mega sporting events.
The original resource may be found here, along with the transcription of the interview in German.
John Ruggie passed away on 16 September with his beloved wife and son at his side. A light has gone out in the world. More than a light. John was a beaming beacon for so many of us who had the privilege to know him, to work with him, to learn from him, to laugh with him, to love him. He achieved academic heights that his colleagues at Harvard and around the world will attest to in the days and weeks to come. Yet his ideas and insights never rested on paper, for his gift was to turn them into the tools of tangible change and his passion was to make the world a more equal and just place. He did both.
Nowhere is John’s gift for crafting words that create change more evident than in the UN Guiding Principles on Business and Human Rights, which he authored in his six years as the UN Secretary-General’s Special Representative. We had the good luck and constant delight of working with John through that time as part of a wider team which he fondly dubbed ‘Team Ruggie’ and which became an enduring extended family. As we then set up Shift to be part of the movement needed to translate the Guiding Principles into practice, John was at our side – not just formally as our Chair, but as our champion, support and guide, and above all as our friend.
John’s legacy cannot be captured in a few words. He leaves behind not just the seeds of the change he wanted to see in the business world, but the blossoming on all continents of new policies and practices, laws and regulations, fans and followers. John’s spirit will live on in all we do at Shift, alongside so many others in the business and human rights movement, to further nurture and fuel the change he set in train. Indeed, our name comes from a phrase John would gleefully pronounce, a sparkle in his eye, whenever he saw a new sign of the impact of the Guiding Principles – ’Shift happens!’ So it does – when grounded not just in the intellectual depth and drive but in the humanity, humility, integrity and compassion that were so central to how John moved through the world. We miss him deeply.
Our thoughts are with Mary and Andreas Ruggie and their wider family at this time. A memorial service will be held in Cambridge, Massachusetts with details to be announced in the coming days.
Caroline and Rachel
And the Shift Team
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