Legislating for Human Rights Due Diligence: How Outcomes for People Connect to the Standard of Conduct

As the move towards mandatory due diligence measures gathers pace in Europe there are many important points being debated about how best to turn the expectations in the UN Guiding Principles on Business and Human Rights (UNGPs) into a binding corporate duty. An important point of contention concerns the relationship between requiring companies to carry out human rights due diligence (HRDD) processes and the outcome of those efforts in human rights terms.

HRDD is often characterized as an ‘obligation of means’ – meaning that it is the quality of the process that matters. This is often contrasted with an ‘obligation of result’ – meaning that it is whether or not you achieve a particular outcome that matters. Treating this as a strict binary, some stakeholders assert that results are therefore never relevant to an assessment of the quality of a company’s due diligence. Meanwhile, others argue that results should be definitive in such assessments. At Shift, we are committed to helping advance a constructive discussion about mandatory HRDD. We think both positions miss some critical nuance in how due diligence-based standards of conduct typically function in practice, and in how the concept of due diligence is used in the UNGPs. This matters if we want to ensure that new legislation is going to be as effective as possible.

The responsibility to respect human rights is a standard of conduct – a level of behavior that we expect companies to meet, reasonably adapted to the specific human rights risks connected to their operations and value chain relationships. The intent of this standard is to prevent and address harms to people; due diligence is the means through which the UNGPs expect companies to achieve that objective (as stated in the commentary to Guiding Principle 15 Group 33 Created with Sketch. ( Business enterprises need to know and show that they respect human rights. They cannot do so unless they have certain policies and processes in place. Principles 16 to 24 elaborate further on these. ) ).

The UNGPs adopt a common sense understanding of the term due diligence and connect it to the objective of preventing and addressing harm. As the definition in OHCHR’s Interpretive Guide states:

Due diligence has been defined as “such a measure of prudence, activity, or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent [person] under the particular circumstances; not measured by any absolute standard, but depending on the relative facts of the special case.” In the context of the Guiding Principles, human rights due diligence comprises an ongoing management process that a reasonable and prudent enterprise needs to undertake … to meet its responsibility to respect human rights

In other words, HRDD is not just a set of processes disconnected from outcomes: HRDD aims to avoid specific harms and should be appropriately adapted to that task. It may not always succeed in doing so (as discussed further below), but that is its objective. It follows that the outcomes of due diligence will always be a relevant factor in assessing the reasonableness or adequacy of due diligence in any particular case.

This means that any legal definition of a new corporate duty should logically start with what the standard of expected behavior is intended to achieve – respect for human rights – and make clear that due diligence is the means through which that expectation should be met. It should also make clear that the ‘outcomes’ (or results) of human rights due diligence that are relevant are the outcomes for people. Developing a policy commitment is not a ‘result’ in and of itself, nor are carrying out audits or conducting training for staff. The fact that they may be more easily measurable should not lead to confusion about what they actually demonstrate. They are activities that can indicate that a company is seeking to meet the standard of conduct, but they are not, without more, evidence of outcomes for people.

In our work at Shift to support the development of effective due diligence requirements, we have found it helpful to highlight two ways in which the outcomes of HRDD are relevant to assessing the reasonableness of a company’s efforts. The first is about outcomes in a specific case; the second is about outcomes over time.

First, there are many legal standards that involve assessing the ‘reasonableness’ of a person’s conduct relative to a particular risk by considering both the objective of the standard and how a person seeks to meet it in practice. For example, consider how we would assess whether a person met the standard of ‘driving safely’ in a specific case. We would of course consider how a person drove the car, but our assessment of whether they were indeed driving ‘safely’ would not only depend on whether they checked their mirrors, stopped at red lights and wore their seatbelt, but also whether they had any accidents or broke the speed limit. In other words, we would consider both how they drove and the outcomes of their driving. If they had an accident, and we were trying to determine whether they caused or contributed to it, we would look at the overall quality of how they were driving, as well as any third party or contextual factors, to determine whether they failed to live up to the standard of expected conduct in those specific circumstances.

The second way in which outcomes are relevant concerns the nature of due diligence as an evolving standard of conduct. Legal standards that rely on an assessment of what is ‘reasonable’ behavior are designed to evolve over time; what is considered safe driving today will look different as our understanding of what is more or less effective in preventing road accidents also evolves. This is why tracking the effectiveness of a company’s human rights efforts is a vital step in due diligence: it helps ensure that due diligence is not reduced to endless cycles of the same processes that produce no meaningful change in outcomes for people over time. This is also why Guiding Principle 20 Group 33 Created with Sketch. ( In order to verify whether adverse human rights impacts are being addressed, business enterprises should track the effectiveness of their response. Tracking should:
(a) Be based on appropriate qualitative and quantitative indicators;
(b) Draw on feedback from both internal and external sources, including affected stakeholders.
emphasizes the role of feedback from affected stakeholders, because a company’s understanding of the effectiveness of its due diligence efforts needs to be informed by the perspectives of those who are or may be impacted. 

Clearly then, the outcomes of due diligence do matter in assessing its reasonableness or quality. However, there will be situations where due diligence is judged to be appropriate – it may even have been considerable and extensive – but impacts still occur.

Clearly then, the outcomes of due diligence do matter in assessing its reasonableness or quality. However, there will be situations where due diligence is judged to be appropriate – it may even have been considerable and extensive – but impacts still occur. For example, a company may have a strong non-discrimination policy in place, supported by extensive training and awareness raising about the risks of gender, racial and other forms of bias; it may have and use accountability and disciplinary measures to incentivize compliance with and address breaches of the policy; it may have effective grievance mechanisms that are trusted by complainants; it may have leaders that are themselves diverse and demonstrate respect for others in practice; and yet it can still be that someone in the company sexually harasses another person or makes a hiring decision informed by racial prejudice. So due diligence must manifestly aim at achieving the outcome of no harms; however, the occurrence of a harm is not in itself sufficient evidence that the due diligence was inadequate.

But this becomes more challenging if harms recur or persist. While a due diligence standard allows that it can take time to achieve improved outcomes, particularly in complex cases involving multiple actors and systemic impacts, at some point it is not possible to maintain that a company’s due diligence processes are appropriate to the nature of a specific impact if the same harms continue to happen without any change in the company’s approach. In such cases, the severity of the harm will be a critical factor in determining what is a resonable timeframe for seeing progress.  

In conclusion, focusing on a binary between a legal obligation of ‘means’ versus one of ‘results’ risks oversimplifying the relationship between process and outcomes in assessing the quality of a company’s HRDD. Instead, it may be more helpful to explore the various ways in which the outcomes of due diligence will be relevant to assessing its reasonableness in practice and how this can be appropriately reflected in legislation. This is a critical conversation to have if we want to design effective laws that will set the right incentives for business while ensuring that new corporate duties actually lead to improved outcomes for people in practice.

Towards ‘Sustainability Due Diligence’: Synergies between Environmental and Human Rights Due Diligence

Today in 2021, there should be little need for a discussion on whether human rights and the environment are intrinsically connected. The question is rather, how can businesses best address risks to people and planet in a holistic way and how can the policy environment enable this transition?

The question is rather, how can businesses best address risks to people and planet in a holistic way and how can the policy environment enable this transition?

Companies operating today can no longer treat their climate, other environmental and human rights risks in silos: there are too many interconnections between these areas for this approach to work. Rather, what we need is for companies to be empowered, equipped and incentivized to adopt a comprehensive sustainability approach to risks to people and to the planet. The upcoming EU legislation under the Sustainable Corporate Governance Initiative offers a golden opportunity to design a due diligence structure to do just that. And importantly, there are already examples of harmonized due diligence that can serve as a foundation on which new legislation can build.

Here we offer some key reflections that we believe can help inform a harmonized due diligence obligation.

We have applicable international frameworks already

The UN Guiding Principles on Business and Human Rights (‘UNGPs’) provide a clear and authoritative reference point for what is expected of companies when it comes to human rights due diligence. The OECD Guidelines for Multinational Enterprises (‘OECD Guidelines’) echo the UNGPs’ expectations on human rights and extend the due diligence framework set out in the UNGPs to environmental impacts and risks (as well as other relevant risks). An overarching 'sustainability due diligence' Group 33 Created with Sketch. (This term draws on a research-based concept of sustainable value creation within planetary boundaries, as described further in the SMART project’s reform proposals for EU company law and corporate governance.) framework should clearly build on these soft law due diligence standards and methodologies, and create further connections and synergies between them.

An overarching ‘sustainability due diligence’ framework should clearly build on these soft law due diligence standards and methodologies, and create further connections and synergies between them.

Companies navigate the relationship between international expectations and national requirements in both areas

In the area of human rights, companies are expected (under the UNGPs and OECD Guidelines) to look at internationally recognized human rights standards set out in core UN and ILO instruments which inform their due diligence approach and define the baseline against which they assess their impacts on people.

National laws also regulate human rights: they may compel company actions in a range of areas, such as discrimination, labor arrangements and health and safety. However, if these standards fall below, or conflict, with international standards, companies are still expected  to meet, or seek to meet, international standards. Notably, the UNGPs expand these expectations to the company’s business relationships, whereas applicable law typically focuses on the company’s own operations. 

We find a similar picture when looking at the environmental side. Companies are expected under the OECD Guidelines to take due account of the need to protect the environment – referencing in turn principles and objectives contained in international agreements. Similarly, companies can rely on national environmental laws, but this is often insufficient on its own to meet international environmental expectations of business – and, again, may not extend beyond the company’s operations.

Of particular note, a recent court case in the Netherlands held an energy company (Royal Dutch Shell) to international climate standards (the 2015 Paris Agreement) rather than to national standards. The court also relied on international expectations contained in the UNGPs, rather than applicable national law, to conclude that the company had a responsibility for scope 3 emissions, beyond its own operations.

In both areas then, companies are increasingly accustomed to navigating international and national standards.

In both areas then, companies are increasingly accustomed to navigating international and national standards. On the environmental side however, and in contrast to the human rights side, there is no comprehensive body of international standards on the protection of the environment. This can be addressed by EU regulators defining the adverse environmental  impacts that companies should be assessing as part of their due diligence and specifying the key principles of environmental law that companies should have regard to in carrying out their due diligence (such as the precautionary principle).

Growing convergence around the scope of responsibility

Companies are expected to take a full value chain approach to human rights due diligence under the UNGPs and the OECD Guidelines. (This full value chain approach is coupled with a specified method for prioritising impacts within the value chain, as further described below). The scope of due diligence extends to impacts that may be directly linked to their operations, products or services through their business relationships. For environmental due diligence, a similar full value chain approach is expected under the OECD Guidelines. Companies should incorporate both direct and indirect environmental impacts connected to their operations into their due diligence. There is also a growing consensus that individual methodologies used for specific environmental areas (such as water, greenhouse gas emissions and biodiversity) should cover impacts beyond a company’s direct operations and tier one suppliers. Taking a full value chain approach to sustainability due diligence is becoming the expectation.

Not only looking at risks to business – but also risks to people and planet

The risks companies will identify through their due diligence will look different – depending on whether they are viewed from the perspective of people, the planet, or the business.

In the human rights space, companies are expected to look at risks to people from the perspective of those who are or may be affected, using international human rights standards. Similarly, in the environmental space, companies are expected to look at risks to the environment from the planet’s perspective – meaning that they need to consider environmental impacts whether or not they also pose risks to the business. This is where new legislation can provide greater clarity for companies, in defining what would constitute an adverse environmental impact.

Beyond this, by bringing these areas together under one ‘sustainability due diligence’ umbrella, we have the opportunity of more clearly understanding the inter-connections between these impacts.

Beyond this, by bringing these areas together under one ‘sustainability due diligence’ umbrella, we have the opportunity of more clearly understanding the inter-connections between these impacts. For example: impacts on the environment and the climate that, over a longer timeframe, will manifest as impacts on human rights; or impacts on human rights that can be mitigated but in a way that harms the environment in the immediate term. This being said, we also need to ensure that bringing these areas together under one umbrella does not result in the dilution of environmental risks which do not have immediate human rights impacts.

Potential to take a longer term view of risk

One point to consider when looking at environmental and human rights risks together is that companies commonly use different timeframes and geographic locations for assessing them.

Looking at risks to people and planet today will yield a different result than looking at impacts that could occur in a year, in ten years or in a generation’s time.

Looking at risks to people and planet today will yield a different result than looking at impacts that could occur in a year, in ten years or in a generation’s time. The timeframe for assessment of human rights impacts tends to be more immediate, with a focus on human rights impacts that could occur in the short- or medium-term. Due diligence can also include longer-term impacts (e.g. from the future decommissioning of a project or transitions to automation), however, capturing long-term human rights impacts can be a challenge because of limitations in predicting future activities and behaviours. When it comes to environmental impacts, the time horizon for assessing impacts tends to be longer and commonly relies on scientific projection data.

Furthermore, human rights due diligence will typically capture impacts on people close to the company’s site, or those impacted by its suppliers’ operations. Some environmental impacts also have localized impacts on a specific habitat or water source, while others have both cumulative impacts and ripple effects on the environment elsewhere, and/or are global in nature. Where environmental impacts are local, this could more visibly result in local human rights impacts (e.g. impacts on a community’s access to water or sanitation). In contrast, where the environmental impacts manifest elsewhere or are global, this could connect to human rights impacts elsewhere (e.g. communities’ livelihoods impacted by greenhouse gas emissions) – but it is more challenging to identify the specific groups of people affected.

In practice, we are seeing that companies are finding it easier to bring environmental and human rights considerations together under one broader umbrella when both sets of impacts are more localized in nature. New legislation can reflect the differing timelines and locations of where risks may manifest, and help ensure that due diligence enables capturing change over time, both to the risk and to the expected mitigation/action.

Whose views determine which risks to prioritize?

The human rights risks that companies are expected to prioritize for attention are those that pose the greatest potential harm to people. Since human rights risks should be understood from the perspective of those who are or may be affected, the most effective way to conduct due diligence is to conduct stakeholder engagement – with those who could be impacted or their legitimate representatives, or with credible proxies where direct engagement is not possible, as well as with human rights experts. In the environmental space, we are seeing a growing number of companies including elements of human rights-based stakeholder engagement as part of their environmental work – and this is also expected for environmental impacts that result in impacts on people (as evidenced for instance by the European Parliament’s 2020 proposal for an EU legal framework to halt and reverse deforestation).

The opportunity here is to support companies in conducting stakeholder engagement that can inform both their environmental and human rights due diligence, while recognizing where the objectives of, and audiences for, engagement may differ.

The opportunity here is to support companies in conducting stakeholder engagement that can inform both their environmental and human rights due diligence, while recognizing where the objectives of, and audiences for, engagement may differ. Further, engaging on both human rights and environmental risks together can help companies see the interlinkages, develop more nuanced prioritization criteria and methodologies, and inform and explain their prioritization decisions.

What actions is a company expected to take?

The actions that a company is expected to take in response to a human rights impact differs depending on how the company is, or could be, involved with an impact. There are different expectations for action depending on whether a company has caused the impact, contributed to the impact, or whether the impact is directly linked to the company’s operations, products or services by a business relationship. Actions range from ceasing the impact, preventing the impact, building and using leverage (alone or with others) to prevent and/or mitigate the impact (or seeking to do so), and remedying the impact.

Cause and contribution as modes of involvement are also well-known in environmental due diligence. In particular, we often see companies talk about cumulative environmental impacts: how their actions alongside those of other parties can combine to create environmental impacts. This is akin to contribution in parallel, an accepted mode of involvement in the human rights space. The actions expected for instances of cause or contribution are similar to the human rights space: cease, prevent, and/or mitigate the impacts and remedy the contribution.

Although not necessarily framed as such, a number of environmental methodologies expect companies to build and exercise leverage. But there may be some areas of distinction to consider when it comes to remedy. A company’s responsibility to remedy a human rights impact seeks to restore the person to the situation they would have been in, had that impact not occurred, or as close to it as possible. Companies may also be expected to remediate their environmental impacts – with the appropriate remedy being defined by regulation or the applicable international framework. At the same time, when it comes to environmental harm, there may be broader repercussions where environmental degradation has had ripple effects and led to other forms of environmental harm. Where environmental harm results in impacts on people, the remedy expectations of companies are clear. When they have not (or have not yet), the remedy expectations are less clear.

Where environmental harm results in impacts on people, the remedy expectations of companies are clear. When they have not (or have not yet), the remedy expectations are less clear.

A new corporate duty could reinforce the importance of companies using leverage to tackle risks, and articulate what can be reasonably expected of companies in terms of action depending on their mode of involvement with an impact, including what remedy can look like (and to whom it can be delivered) in the environmental space.

Conclusion: Embedding due diligence in governance

As the connections between the ‘E’ and the ‘HR’ of ‘HREDD’ grow, so too will the need for cross-functional structures and discussions that enable companies to take a holistic approach to due diligence. This extends to when companies are setting overarching targets, as well as how they set up their internal accountability and responsibility structures. Synergies should start to happen between functions, budget lines, programming and expertise on these areas within companies. And this in turn will start to inform business models that are viewed as sustainable for the long term – as well as those that are not. New EU regulation can play a pivotal role here in supporting companies to take a holistic approach to sustainability risks, which builds on and amplifies existing methodologies and standards, in a way that is embedded in appropriate governance structures. 

Covid inequalities highlight the pressing need for social reporting

This post was also published by CDSB.

The pandemic has accentuated the important interconnections between our social and environmental systems, and the deep inequalities that exist across society.

As researchers have emphasised, the likelihood of diseases like Covid-19 increases with environmental degradation and climate change, factors which are driven in large part by an unsustainable and extractive model of growth.

There are an estimated 500 million smallholder farming households globally, these people comprise a large proportion of the world’s poor living on less than $2 a day. These farmers produce 30% of the world’s food supply and are forced to adopt unsustainable farming practices to make ends meet. As health impacts and climate change continue, those communities least resilient and least able to adapt are also the most socially and economically vulnerable.

Inequalities have been highlighted and exacerbated by the pandemic. In the UK and the USA, the data is clear that the impact of the virus has been far from indiscriminate, following lines of race, class and social deprivation. The huge social movement for Black Lives Matter and calls of racial equality on either side of the Atlantic can be seen as an indirect result of this stark inequality. The pandemic also highlighted the undervalued and precariously employed workers in healthcare, education, transportation and logistics, while the global vaccine rollout has exacerbated the already significant divide between the developed and developing world.

However, the pandemic has also created a greater openness to change. This reality is being recognised by a growing number of corporate leaders. There is a burgeoning understanding not only of the contribution of businesses to these glaring social problems, but also, of the benefits that such transformation might bring to companies, their investors and wider stakeholders.

Progress, though, is hard for companies to demonstrate – and even harder for investors, regulators and others to measure and reward. We need clarity on what constitutes quality information on companies’ social performance, which is comparable and consistent.

Progress, though, is hard for companies to demonstrate – and even harder for investors, regulators and others to measure and reward. We need clarity on what constitutes quality information on companies’ social performance, which is comparable and consistent.

Development is clear when it comes to the mainstream reporting of environmental information. The international support and uptake of the Task Force for Climate-related Financial Disclosures (TCFD) Recommendations is evidence of this, as is the climate-first approach of the IFRS’s recently announced International Sustainability Standards Board. The same, however, cannot be said for corporate reporting on social issues, nor the connections between the ‘E’ and ‘S’ of ESG, which are largely absent from present mainstream reporting practices. This makes it hard to reach effective and impactful decisions on capital allocations towards social sustainability.

As a starting point, it is important to recognise that the categories of ‘social’ issues usually considered in ESG reporting are largely about human rights impacts: that is, impacts on people that reach the level of affecting their basic dignity and equality. For instance, diversity and inclusion addresses discrimination, while health and safety and privacy are themselves human rights. Too often the centrality of human rights issues to companies’ ‘social’ risks and opportunities is neglected to the detriment of reporting quality, being lumped together with philanthropic projects and staff volunteering, which distract from focus on how the business is run.

Indeed, the problems we encounter are not a lack of reporting on ‘social’ issues, but the limited usefulness of the most common corporate disclosures. Reporting is still frequently focused on case studies designed to cast companies in a positive light or boilerplate statements about human rights policies and processes. The social metrics reported by companies are often detached from the risks and issues identified elsewhere in their reporting. They focus largely on inputs, activities and near-term outputs, while offering little insight into how well the issues are managed and what results are achieved – for the people affected and for the business. Such disclosure appears more as a tick-box exercise than an important means of monitoring key business concerns and communicating with investors.

Investors need coherent and meaningful insight into a company’s identification, management and monitoring of social risks, as set out in the kind of human rights due diligence process that has appeared in international standards for nearly ten years, and which looks set to appear in major new EU regulations within the next two or three years. They need to know whether a company has the business model, strategy, leadership mindset and risk management processes necessary for it to get ahead of the kinds of risks to people that could end up being tied to their business – risking reputation, resilience and revenues – if they don’t pay attention.

The responsibility for the quality of the information available in

mainstream social reporting does not lie solely with companies. It is also that of regulators who have yet to set clear expectations for companies to meet, and of mainstream investors, who have themselves lacked clarity on what they need from corporate reporting on these issues. And, importantly, responsibility lies with standard setters and framework providers as well: the present ecosystem of guidance has to date not provided companies with sufficient support to deliver effective mainstream reporting.

Yet there is hope in what we are starting to see through developments in reporting regulations such as in the EU with the evolution of corporate sustainability reporting and the US with the SEC’s rules on human capital reporting and larger market actors driving in the same directions, as seen in BlackRock’s most recent letter to CEOs, which highlighted some priorities for social reporting, alongside expectations for climate disclosures.

In its upcoming position paper, CDSB will set out a roadmap for the inclusion of social issues into its mainstream financial reporting framework and technical work. Building on CDSB’s TCFD-aligned reporting framework and will respond to issues noted above. The inclusion of social issues will offer companies a framework for reporting comprehensively on financially material sustainability risks and opportunities.

As the the leading center of expertise on the UN Guiding Principles on Business and Human Rights, Shift’s primary focus is on the materiality of a company’s impacts on people. However CDSB and Shift recognise the critical value to be offered by a robust framework for assessing and reporting on financially material social issues. Indeed, CDSB and Shift believe this will help companies in understanding the increasingly dynamic relationship between these two concepts of materiality, as well as the crucial links between environmental and social risks and how companies respond to them. Building these connections will provide decision makers with important information on social, environmental and climate issues, necessary for the transformation to a just and sustainable future.

Letter from John Ruggie to German Ministers regarding alignment of draft supply chain law with the UNGPs

New York, NY.

Professor John Ruggie writes to German Ministers to welcome move towards a national law on corporate human rights and environmental due diligence in supply chains, while also raising questions about elements in the draft law and the need to ensure alignment with the UN Guiding Principles.


This letter was originally written in English. An unofficial translation into German by the Business and Human Rights Resource Centre is available here

Keynote Speech by John Ruggie at Corporate Due Diligence and Civil Liability Webinar

These remarks were originally delivered on January 28, 2021 by Professor John Ruggie at the Corporate Due Diligence and Civil Liability Webinar, hosted by Nova Centre.  

“Thank you, State Secretary, and thanks to all the sponsors and participants of this seminar series. I have been in this field for a while and I am so pleased by the fact that we are having discussions at levels of detail and possibilities that would have been hard to imagine just 10 years ago, when the Guiding Principles were adopted. I know we have a lot further to go, but every once in a while, I like to remind myself that we have already come a fair way that we can build on…”


Shift Submission to the European Commission’s Consultation on EU Sustainable Corporate Governance

In February 2021, Shift submitted responses to the European Commission’s Consultation Proposal for an Initiative on Sustainable Corporate Governance. The feedback provided through this questionnaire will be taken into consideration as the European Commission drafts its policy position.

Shift’s key points include:

  • EU legislation establishing a new corporate duty to conduct human rights and environmental due diligence (HREDD) has the potential to help level the playing field, ensure that Boards are aware of their responsibility to oversee the management of a company’s salient human rights and environmental risks, and drive a common understanding of what “quality” due diligence looks like. Importantly, it could also help ensure greater access to remedy through the inclusion of appropriate civil liability provisions. 
  •  Directors should be accountable for overseeing how a company prevents and addresses its negative impacts on people and planet. Even without the reform of directors’ duties, the introduction of a corporate duty to conduct HREDD would make a significant contribution to this objective by requiring directors to oversee appropriate due diligence systems.
  •  The due diligence process expectations set out in the UNGPs and in the OECD Guidelines should form the core requirements on business in any new regulation. But to ensure meaningful implementation, those enforcing this new duty will need to pay attention to key features of HRDD that are indicative of the seriousness of a company’s efforts. National regulators will need guidance on how to assess whether there is an authentic intent and effort within a company to both find and reduce risks to workers, communities and other affected stakeholders. We propose what some of these “Signals of Seriousness” could be for HRDD in a draft resource attached to our submission, informed by initial testing with business, government, and civil society stakeholders. 
  •  Any new duty needs to have improved outcomes for people as its ultimate goal. As such, it is important that HREDD is not conceived of as a “tick-box” exercise, but as one that necessarily involves the creative use of leverage beyond contractual terms or commercial leverage alone – including public advocacy where appropriate and partnership with industry peers and stakeholders to drive change – as well as meaningful engagement with affected stakeholders
  • Any new legislation should have a wide scope, including both SMEs (with appropriate flexibility in implementation) and foreign companies operating in/into the single market.
  •  To ensure a level playing field in practice, there need to be meaningful consequences for companies that clearly fail to meet a new duty, involving judicial and administrative measures. This should include: 
    • creating or endowing national-level regulatory bodies with the capacity and expertise to carry out regular reviews of corporate disclosure and performance and hold companies accountable; 
    • EU regulatory oversight through a new, fit for purpose entity with its own enforcement powers that brings together national regulatory bodies and expert stakeholders; and 
    •   civil liability for certain harms with a defense where companies can demonstrate that they undertook due diligence that was appropriate and proportionate to the relevant impacts. The mere fact of conducting some form of due diligence should not be considered as a complete defense to liability, or as a safe harbor against claims being brought.
  • A new corporate duty needs to be accompanied by a range of other EU policy measures to set the right incentives and help bridge the “accountability gap” between the likely scope of liability on the one hand and the full scope of HREDD in line with international standards on the other.


Shift and Frank Bold Submission to the Consultation on Potential Needs for Changes to the Governance and Funding of EFRAG

Shift joined Frank Bold in responding to the the consultation process on potential needs for changes to the governance and funding of the European Financial Reporting Advisory Group (EFRAG).

The submission comments on issues of due process, governance structures, representation of private sector and civil society; representation of Small and Medium Enterprises (SMEs); on cooperation with other standard setters and initiatives; on governance structure and funding.

Shift and Capitals Coalition partner to develop an accounting model that will help assess and disclose corporate progress towards achieving living wages

New York, NY.

Shift is delighted to announce that, in partnership with the Capitals Coalition, the organization will launch a 21-month initiative to develop an accounting model for living wages. 

Since 2018, Shift has explored accounting methods as one of the six focus areas of Valuing Respect, a three-year research and co-creation project to develop better ways to evaluate business respect for human rights. As Rebecca Henderson of Harvard Business School writes in Reimagining Capitalism, “It turns out that reimagining capitalism requires reimagining accounting… even tiny changes in accounting rules can change behavior in profound ways.” 

In an expert roundtable, hosted in June 2019 by the Institute of Chartered Accountants in England and Wales, participants agreed that focusing on living wages is a sound starting point to make meaningful progress towards reflecting the value of respect for human rights in accounting practices.

“An initial focus on living wages made sense, both because wages are relatively easy to measure, and – more significantly – because a living wage has catalytic power to open the door to the realization of many other human rights.”

Caroline Rees President – Shift

Following the roundtable, Shift partnered with the Capitals Coalition in designing the new project. The aim is to develop an accounting model for companies to assess and disclose progress towards living wages in both their workforce and supply chains. The project will be based on broad and inclusive consultations with experts and stakeholders; and it will build on important work already done in the field, including respected methodologies for calculating living wages, which will provide an essential benchmark within any accounting model. 

“This project is incredibly important for how companies understand the value created by people – social and human capital. By including a living wage in the accounts, we can address one of the biggest challenges of implementation – that it is seen purely as a cost, ignoring the fact that investing in living wages can generate a return for the individuals, the company and society.”

Mark Gough CEO – Capitals Coalition

The project has already attracted high levels of interest from companies, investors and civil society organizations. It will be launched in January 2021.

To learn more about the project and for any other inquiries, please email communications [at] shiftproject [dot] org

Opening Remarks by John Ruggie at the Conference “Human Rights and Decent Work in Global Supply Chains”

The recording of these remarks is available here.

The UN Guiding Principles on Business & Human Rights are approaching the tenth year since their unanimous endorsement by the Human Rights Council. It is encouraging that their uptake continues apace, not only by businesses but beyond. For example, human rights factors make up the bulk of the S elements in ESG investing, with investors clamoring for more robust metrics. Also, global sports bodies, including the International Olympic Committee and FIFA, have made human rights a mandatory part of their host city agreements.

The UNGPs were conceived to generate an ongoing interactive dynamic of a smart mix of measures – voluntary and mandatory, national and international – that would strengthen the business and human rights regime over time.

But I confess that governments, with exceptions, have been a weak link in this dynamic. So, I am pleased to see action picking up on two significant fronts in the EU context.

The first is human rights due diligence. This is the foundational construct for businesses to identify, prevent, mitigate and account for their adverse human rights impacts – throughout their operations and business relationships.

The experience of the past decade has demonstrated that many multinationals understand the importance and utility of human rights due diligence. But the record also shows shortcomings and weaknesses in implementation.

In response, Germany, like several other governments, is giving serious consideration to making human rights due diligence mandatory, as foreshadowed in its 2016 National Action Plan. Similarly, mandatory human rights and environmental due diligence is on the legislative agenda of the European Commission.

…many details still need to be worked out. Perhaps none is more important than the question of liability. It may be helpful for me to recall that the UNGPs foresaw the possibility of liability…

I appreciate that many details still need to be worked out. Perhaps none is more important than the question of liability. It may be helpful for me to recall that the UNGPs foresaw the possibility of liability, and how it might play out in practice. The Commentary to UNGP 17 state that:

Conducting appropriate human rights due diligence should help business enterprises address the risk of legal claims against them by showing that they took every reasonable step to avoid involvement with an alleged human rights abuse.

Of course, case-specific facts would also be considered in any such assessment.

A second area that shows progress is the strengthening of non-financial disclosure requirements, including on human rights. Indeed, there is a rush into this space by private international standard setting bodies, large asset managers, alliances of consulting firms and the like, all wanting a piece of the ESG standards market.

The EU, as the world’s largest trading bloc, has a golden opportunity here to provide authoritative standards, which inevitably would have international spillover effects.

Here the EU, as the world’s largest trading bloc, has a golden opportunity to provide authoritative standards, which inevitably would have international spillover effects.

Perhaps there is still time for the Germany Presidency in collaboration with the Commission to establish a measure of policy coherence across the related EU initiatives, so as not to contribute to overwhelming businesses with potentially overlapping or, worse, inconsistent requirements.

Progress on these two fronts would contribute significantly to the overarching concern of this conference with promoting decent work in supply chains.

Indeed, I believe it would go even further and help inform the grand debate taking place on both sides of the Atlantic on the social purpose of the corporation, on the need for it to better serve a broad array of stakeholders in addition to shareholders.

So in conclusion, thanks again, and I wish you every success on the journey ahead.

John G. Ruggie, the Berthold Beitz Research Professor in Human Rights and International Affairs at Harvard’s Kennedy School of Government, has served as UN Assistant Secretary-General for Strategic Planning, and as the Secretary-General’s Special Representative for Business & Human Rights. He chairs the Board of Shift.

Does our human rights work… work? The case for experimentation and testing

Everyone working to ensure that business acts with respect for people is in the business of behavior change. We want companies, and individuals within them, to act in ways that enable respect for human rights. That being so, it’s intriguing that we have not drawn on the vast range of existing psychological insights about how to influence behavior. In our first-of-its-kind experiment in the business and human rights field, we drew on the field of behavioral science to test how consumer choices might help to reduce pressure on couriers delivering online purchases. We found how best to nudge consumer behavior, which provided some surprising discoveries, data and evidence about what works.

We simulated an online shopping experience and asked 2,500 people to select their delivery options. Consumers’ delivery choices can place pressure on couriers handling the items. Using the latest psychological research, we designed six behaviorally-informed nudges to test what was most effective in nudging consumers towards choosing longer delivery times. This experiment and its revelations demonstrate the need for evidence and experiments of this kind for a number of reasons:

  1. Experimental data are the only way of definitively knowing what works.

Anecdotal evidence and expert advice can only get us so far. Before we ran our experiment, we had a fairly strong contention (based on existing research) that the most powerful nudges would be defaults (pre-selecting our preferred option) and social norms (telling people how others are behaving). We were wrong. These nudges did not seem to work. Instead, other nudges that we tested were more effective. This is important to know in order to avoid promoting or investing in ineffective or inferior solutions. Testing our interventions enables us to either:

a) validate our intuitions, enabling us to scale-up with confidence in our predictions; or

b) disprove our instincts, thereby saving us money, time, effort and resources on solutions that do not work.

By evaluating and testing our behavior change interventions early-on we can create a symbiotic process of rapidly designing and testing as we roll-out or scale-up, confident in our knowledge that the intervention works. 

  1. Experiments allow us to understand attribution, cause and effect.

We were able to isolate the effects of our nudges by using control and treatment groups in a randomized control trial. This enables us to isolate the effects of any one intervention to know whether it works, as compared to the control group receiving no intervention. Other methods of evaluation are simply not able to say definitively that any effects are attributed to their intervention. For example, if we had used a before/after comparison that compared consumers’ delivery choices from March 2019 to March 2020, we would be unable to pinpoint our intervention as being responsible for any preference changes. Instead, other underlying variables might be responsible for any changes, such as changes in consumer awareness or the COVID-19 pandemic. By using control and treatment groups we are able to know whether our interventions work, and to what extent. For us to be more confident in the results, our evidence could be backed up by other researchers replicating the experiment via both online simulations and online retailers. (We would welcome this!)

  1. Experiments test how people actually behave, and not simply what they say they will do.

What people say they will do and what they actually do can be different. Tracking behavior tells us more about action than what people say they will do, their intentions or self-perception. In our experiment, people were equally likely to describe themselves as ethical consumers. Yet, their behavior betrayed their intentions. The data showed that while younger and older people were equally fairly likely to describe themselves as ethical consumers, younger people were the least likely to choose the more ethical delivery option. Our experiment was an online simulation and so may not capture real-world behavior as accurately because the purchases are not real. Nonetheless, this shows why it is critical to measure behavior, and not simply rely on what people say they will do.

In the business and human rights field, efforts to assess what companies are doing typically focus on activities and outputs such as policies, processes, people trained, etc. It is often difficult to see whether or how those activities lead to different outcomes for people affected by corporate activity. This is because behavior change is often the critical missing link: what people are supposed to do (or even what they intend to do or believe they will do) often differs from what they actually do in practice. We need to pay much greater attention to the individual behaviors that need to change in order for corporate respect for human rights to be realized. These behaviors can be influenced, measured and tested using experimental methods to know whether we are succeeding.

We need to pay much greater attention to the individual behaviors that need to change in order for corporate respect for human rights to be realized.

We believe that behavioral science could be more widely deployed to transform business practices. Some areas that we see as particularly ripe for further experimentation and testing include:

  • Enabling employees across the business to speak up and raise issues when they spot potential human rights risks and impacts;
  • Ensuring that human rights training translates into actual changes in behaviors and practice;
  • Designing grievance mechanisms in ways that encourage intended users to use them in practice; and more.

Our vision is for more experimentation and testing in the real-world to demonstrate impact and outcomes for people. Indeed, this is the only way we can truly know what works.

If we want to make respect for people’s human rights the norm in how business gets done, we need to focus more on behaviors – what people actually do, not just what they intend to do.

If we want to make respect for people’s human rights the norm in how business gets done, we need to focus more on behaviors – what people actually do, not just what they intend to do. For that, we need more experimentation and testing – in real-world settings – to find out what makes the difference and delivers improved outcomes for people. Indeed, this is the only way we can truly know what works and therefore where companies should be focusing their efforts and resources. That’s the promise of a behavioral science approach.

Learn more about our work on behavioral science and human rights.

Katryn Wright is a Shift Associate. As a researcher, Katryn focuses on leveraging behavioral science to address common business and human rights and behavior change initiatives. 

Edward Gardiner works as the Behavioural Design Lead at Warwick Business School. 

Dr. Umar Taj is a Research Fellow in Behavioural Science at Warwick Business School.