Resources Archive

Red Flag 4. Privatized access to public goods with risks to quality of services

RED FLAG # 4

The business’s commercial success substantially depends upon offering privatized access to public goods and services, such as water, health, security and housing, where profit-maximization affects
access or quality

For Example

Offering private water or sanitation services where profit-maximization affects access or quality of service
Offering nursing home services and engaging in cost cutting activities at the expense of quality of service
Offering for-profit daycare or education services and engaging in cost cutting activities at the expense of quality of service
Providing private prisons or detention centres and reducing qualified staff or cutting maintenance or essential programs to achieve cost savings
Privatization of public transport, where profit-maximisation results in reduction in frequency of services or access for isolated communities
Investing in companies engaged in essential services where profit maximisation conflicts with quality of service
Private sector involvement in public sectors through Public Private Partnerships or Private Finance Initiatives, e.g. for infrastructure and maintenance services for hospitals and schools where quality or access is adversely affected
Providing consulting services to governments where advice on profit maximisation risks affecting access or quality of essential services
Financial institutions contributing to the financialization of housing — for example, through mortgage policies that favor speculative investment over owner-occupation, such as high-leverage or interest-only loans and bulk sales of foreclosed properties to institutional investors — and by subsequently driving up prices through securitization of those mortgages and other property-backed financial instruments.
Financial institutions contributing to the financialization of food commodities or water by speculating on debt of companies in these sectors, including through credit default swaps and other financial derivatives

Higher-Risk Sectors

Water and sanitation services
Agriculture industry
Healthcare
Care industry, e.g. nursing homes, children’s homes, assisted living facilities
Private prison industry
Education
Public transportation services and infrastructure
Waste management
Capital and Advice concerning essential service:
Private equity (esp. external, leveraged financing)
Financial institutions, including banks, private equity and other providers of capital
Management consulting

Questions for leaders

How does the company identify and respond to any tensions between its responsibility to ensure access and quality, on the one hand, and the need to deliver financial results on the other? What policies guide decision making?
How does the company ensure that its lobbying positions (for example, on regulation relating to access or quality) do not have a potential impact on human rights?
What systems does the company have in place to ensure that early warnings with regard to issues of access or quality of service make their way to senior decision makers?
How does the company ensure access to remedy for people denied adequate access or quality of service?
Are there any inherent perverse incentives in the company’s business model, whereby the denial or reduction of service automatically reduces costs and/or increases revenues without jeopardizing customer retention — for example, by limiting access to high-cost services, deferring maintenance or upgrades, shortening service hours, or prioritizing profitable customer segments over those with greater need?

How to use this resource. ( Click on the “+” sign to expand each section. You can use the side menu to return to the full list of red flags, download this Red Flag as a PDF or share this resource. )

Understanding Risks and Opportunities

Risks to People

Risks to people can arise where vulnerable populations require access to goods or services of adequate quality in order to realize their human rights. In such a context, decisions to reduce costs carry an increased risk of human rights impacts when compared with other goods and services.

Human rights risks that have been highlighted in relation to private sector participation in water and sanitation include lack of equality in provision and discrimination against users (Right to non-discrimination). Further, where serious impacts to quality of service have occurred, there have been accusations that the profit motive has interfered with transparency and accessibility. Cases of privatized water services in France, Bolivia, and Argentina have been said to demonstrate common features – the pursuit of profit maximization by operators leading to unjustifiably higher costs for consumers and diminished service provision. In some severe cases, such as in Bolivia, residents were forced to go without access to clean water, ultimately resulting in large scale public protests. Recent privatization in Rio de Janeiro, Brazil has also given rise to concerns about access, particularly in more vulnerable neighborhoods. Fifteen of Rio’s favelas have reported worsening water supply since the local water utility was privatized. In the UK, Thames Water, the UK’s biggest water company (privatized in the 1989), has been accused of having “taken on too much debt” under the ownership of Macquarie Bank, and fail[ing] to invest in infrastructure”. This is said to have led to a proposal for significant price increases for consumers, without which the company’s chairman warns the company “cannot guarantee safe and resilient water supplies that can cope with climate change and population growth”.

Water scarcity resulting from over-extraction, pollution and declining natural storage capacity is further exacerbated by climate variability and extreme weather events. According to the Intergovernmental Panel on Climate Change, water quality and quantity will be increasingly stressed as global average temperatures increase, leading to greater incidence of drought in many different geographies across the globe.
- Scarcity: Where water scarcity meets privatized water services, the impacts on clean water access for vulnerable populations can be significant, as communities and small-holder farmers compete with water intensive industries such as agricultural and mining for water resources. For example, in Chile, which has a privatized water sector and has experienced drought conditions for several years, there is significant water-related tension between residents, farmers and industry, with an estimated 2% of water being set aside for human consumption and an estimated half the Chilean population living in areas suffering from severe water scarcity. There have been mass protests in 2016, 2019, 2021 over the “injustices inherent in Chile’s private water system”. Competing demands for water resources are expected to intensify as a result of the energy transition, as increasing demand for water intensive copper and lithium to feed global demand for clean energy applications is coupled with community pressures in key regions, such as Chile’s Atacama region.
Quality: Increasing extreme weather events can have an impact on water quality, such as where floods and cyclones bring seawater inland, contaminating freshwater sources or causing pollution where sanitation services are more basic. Rising sea levels can contribute to heightened salinity in groundwater, exacerbating health issues like high blood pressure and heart disease among the coastal communities who rely on groundwater as a source of clean water. Risks are exacerbated when private enterprise does not take into account the differentiated impacts on the most vulnerable populations.
The low carbon transition and the physical impacts of climate change also have the potential to exacerbate inequality when coupled with the privatization of public services, such as electricity provision or wastewater treatment. Rapid transition from fossil fuel-based electricity grids to lower carbon grids in privatized electricity markets has the potential to drive up costs to consumers, and jeopardize access by vulnerable communities. In the wastewater sector, climate change is intensifying water-related disruptions like heavy rainfall, and sea-level rise, which overwhelm treatment systems and increase the release of untreated sewage into the environment. Aging or underfunded infrastructure often lacks resilience to these shocks, and, in privatized markets, cost containment may be prioritized over public safety. As a result, vulnerable communities — especially in coastal and low-income areas — face heightened risks of environmental contamination, health hazards, and loss of protective ecosystems like marshlands.
Without proper mitigation of risk, the provision of for-profit services to dependent resident populations can place vulnerable people at risk of impacts where cost-cutting leads to understaffing, insufficient staff training and oversight and pressure to streamline operational costs.
- In detention centers, reducing qualified staff, cutting maintenance and eliminating programs for detainees risks egregious living conditions, increased violence and overall neglect of prisoners’ human rights. (See Human Rights Advocates submission). (Right to security of the person; Right to adequate standard of living; Children’s rights; Right to Health). For example, private contractor G4S was the subject of a BBC exposé showing “alleged assaults, humiliation and verbal abuse of detainees by officers at [an immigration detention] center.” Following the scandal, the company increased staffing and training, leading the chairwoman of the UK Home Affairs Select Committee to state that the subsequent reduction in profits that followed the changes “raises very serious questions about G4S’s running of the center to make higher profits whilst not having proper staffing, training and safeguarding systems in place.”
- In residential care facilities, understaffing and insufficient provision of training can lead to unacceptable standards of hygiene; resident-to-resident aggressive behavior; restrictions on movement or social interaction; or systematic administering, without consent, of drugs to render residents more “docile” and manageable (see Human Rights Watch report). (Right to bodily integrity (e.g. in the case of drugs administered with free, prior and informed consent); Right to health).
- Beyond pure privatization, potential impacts can arise by virtue of private sector involvement in essential services through public private partnerships (PPPs) (also known as Private Finance Initiative contracts), whereby a private company undertakes to finance, design, build, and operate a public asset (such as a hospital or school) for a set period, with the government making payments based on performance. While such agreements can stimulate innovation and transfer risk from the public sector, critics warn that private sector provision of infrastructure and maintenance services over a long tenure can result in inflated costs for basic maintenance, or in other cases, as these contracts begin to near their maturity, maintenance not being undertaken at all, with impacts on health and access outcomes for people.
- Advocates and journalists have also recognized the role that private equity investment and management consulting plays in incentivizing profit maximization in essential services that risks impacting peoples’ rights.
  - Disclosed private equity buyouts of health care assets (ranging from nursing home chains to medical device manufacturers) rose to USD63.1 billion in 2018; following the COVID pandemic, the figure has exceeded USD200 billion since 2021 alone. A systematic review of relevant studies in a peer-reviewed medical journal found that PE ownership “is often associated with harmful impacts on costs to patients or payers and mixed to harmful impacts on quality”. A study on PE acquisition of nursing homes found a similar negative correlation with health outcomes; another Warton study found PE ownership of nursing homes triggers an 11% increase in mortality. The Warton study authors noted that the short-term focus of many PE business models means that firms are “driven by more than the usual profit motive” and that finding ways to increase profits can be undertaken “in a way that does not benefit patients”. Impacts can be exacerbated when financing is leveraged, whereby the company (e.g. nursing home) must increase profits in order to pay off a loan that is taken on in order to increase efficiency and productivity.
  - BSR has noted a report from the Private Equity Stakeholder Project to the effect that PE-owned foster care centres have records of an increased rate of abuse, forced isolation, and suicide. “PE-owned centers often fail to hire employees with adequate licensing, increase workloads of case workers, and underpay employees. This is all while certain PE firms record profit margins of up to 44 percent, a staggering rate for a public service.”
  - BSR also noted reports that for-profit childcare is less likely to deliver accessible and equitable services, pay decent wages to staff, or offer affordable parent fees.
  - It has been reported that Blackstone and KKR engaged in lobbying efforts to preserve so-called “surprise medical billing” (i.e. where US patients are billed for ‘out of [insurance] network’ physicians working inside ‘in network’ hospitals) which had increased since their acquisition of medical staffing firms; another article reports that private equity investors allowed a hospital to slip into bankruptcy in order to profit from the value of the land.
  - Management consultancies involved in public services have been associated with “consequences includ[ing] the ‘hollowing out’ of the capacity of public institutions, the climate crisis, growing inequality, and the financialization of economies”. In the UK and Australia, pledges and public inquiries have concerned government overreliance on external consultants, with critique suggesting it has led to the “gutting of the public service”, that is the erosion of in-house government expertise and capacity to manage essential services for people.

The involvement of financial actors in housing and food systems can lead to negative outcomes for people.
- Housing: According to the UN, 1.6 billion people worldwide lack adequate housing and this could rise to 3 billion by 2030. In 2021, investors bought one in seven housing units in the USA. Financialization of housing refers to the phenomenon whereby “housing is treated as a commodity – a vehicle for wealth and investment” rather than a social good, impacting the human right to adequate housing. One UN Special Rapporteur (SR) notes that the “vast amount of wealth [in global real estate] has left governments accountable to investors, rather than to their international human rights obligations”, whereby governments prioritize the interests of investors over the right of citizens to housing, and another former SR has noted that financialization has “transformed housing from a fundamental social necessity into an investment tool, stripping it of its intrinsic function to provide secure and dignified living spaces”. Financialization is associated with higher rents, evictions, strict and unforgiving payment schedules and poor quality maintenance, sometimes designed to encourage low-income residents to move out. There are innumerable stories of the effect of lack of affordable housing on vulnerable people, including single mothers.
- Food systems: The financialization of food systems refers to the growing control of agricultural land, supply chains, and food commodities by financial actors such as hedge funds, private equity firms, and sovereign wealth funds. These entities treat food-related assets primarily as vehicles for profit, often prioritizing short-term returns over long-term sustainability and food security. As a result, farmers are increasingly subordinated to contract farming arrangements or reduced to targets within investment portfolios, limiting their autonomy and bargaining power. This shift has also contributed to greater volatility and speculation in global food markets, making prices more susceptible to shocks that can undermine both producer livelihoods and consumer access to affordable food.

Risks to the Business

Financial and Legal Risks, including Loss of Investment:
- Water: In 2014 a water crisis occurred in Flint, Michigan, where the water utility was managed by Veolia, a French multinational. The crisis exposed residents to high levels of lead, which is a neurotoxin and “a decade later, community members continue to grapple with the long term physical and mental health problems unleashed by the water crisis”. According to reports, Veolia knew about issues related to lead in the water, but at the time it was “interested in securing future work with Flint”, so did not take appropriate action. After several years of litigation involving multiple defendants, including the State of Michigan and Veolia North America, there have been several financial settlements for impacted Flint residents, amounting to an estimated USD660 million, as of October 2024. In March 2025 in the United Kingdom, water company Thames Water narrowly avoided temporary nationalization; 30 years of privatization, including issues associated with the involvement of financial institutions, are said to have led to accelerated costs of borrowing and higher costs to consumers.
- Security: Investors in a company to which the Australian government outsourced the operation of offshore detention facilities for asylum seekers, came under pressure from civil society to divest due to allegations of inhumane conditions at the camps. A sustained campaign by faith-based investors and investment networks from 2017 to 2019 focused on investment in the private prison industry. The investors “raised questions about human rights abuses in the companies’ prisons that were uncovered by investigations and identified in lawsuits”, and cited “inmate deaths, poor medical care, allegations of physical and sexual abuse of detainees, and violence.” JPMorgan Chase announced in March 2019 that it “will no longer bank the private prison industry.” In 2021 a US prison snacks provider faced investor pushback on a debt deal, with one investor noting that “[a]ny business whose model is a beneficiary of increased levels of incarceration is really being met with a number of institutions that are outright prohibiting participation” and noting that this “limits the potential buyer base.” A “prolific private equity investor in prisons” also faced criticism along with the prison companies themselves for business models that “very clearly prey on communities of color” by effectively turning systemic racial inequalities into a source of revenue.
- Housing: There has been considerable public concern about financialization of housing. In Ireland in 2021, almost 40,000 people signed a petition to demand the Government take more action against “vulture” investment funds purchasing large quantities of (distressed or undervalued) residential real estate. Several U.S. Senators have publicly addressed concerns about Blackstone’s role in the housing market, including a 2022 letter urging the firm to halt evictions and criticizing its impact on rental affordability.
Reputational, financial and legal risks:
- Privatized essential service providers have heightened exposure to bribery and corruption risks, particularly in the context of high-value, large-scale contracts and complex procurement processes. This is exacerbated in regions with weak oversight and regulatory frameworks. Transparency International highlights that the water sector, in particular, is characterized by high-risk procurement, with various forms of bribery related to licensing, procurement, and construction. Moreover, the Water Integrity Network reports that corruption can increase the costs of building water infrastructure by as much as 40%, equating to an additional $12 billion annually needed to provide worldwide safe drinking water and sanitation.
- In 2018, the US Department of Education deemed a number of private-equity owned for-profit colleges “not financially responsible.”
Business Opportunity and Continuity Risks: Risk of loss of government contracts, increased scrutiny and reconsideration of the social license to operate of the entire industry, potentially leading to government intervention, including renationalization or “remunicipalization” of services.
- Following the G4S immigration center scandal mentioned above, the Independent newspaper ran an article by the paper’s Chief Business Commentator with the headline “Private companies should not be doing this sort of work.” The company later announced it would end its involvement in the immigration and asylum sector but remain involved in the private prison sector.
- In 2016 following mounting criticism on conditions, the US Justice Department ended its use of private prisons. Civil society noted that the move “should prompt other federal departments and state governments” to follow suit (see Human Rights Watch).
- In 2017 the Australian government closed its main offshore immigration detention processing center on Manus Island following allegations of inhumane conditions at the center, operated by a private company.
- A “significant global trend” has been observed involving the “rejection of the private sector, due to its failures to provide adequate services” in water and sanitation, leading to renewed public ownership of those services (see UN Special Rapporteur for Special Rapporteur on the human rights to water and sanitation). Civil society has produced guides for remunicipalization of water for communities and policy makers, premised on claims that “PPPs turn out to be worse for public budgets in the long term, and lead to poor services and a loss of democratic transparency.” In the UK, there have been calls to “abandon the notion that public transport can be left to the private market” from the perspective of quality and accessibility of services.
- Following years of concern about safety, accountability, financial oversight, and fragmented operations in the context of privatized rail infrastructure, the UK has been phasing out passenger rail franchising, with services being brought into public ownership under the Passenger Railway Services (Public Ownership) Act 2024. The process is expected to be completed by late 2027.
- In 2015, a Swedish council became the first to limit private profits in healthcare (specifically capping private profits in publicly funded healthcare at a regional level).

What the UN Guiding Principles Say

The UNGPs address privatization directly in Principle 5 and its commentary, noting that “States do not relinquish their international human rights law obligations when they privatize the delivery of services that may impact upon the enjoyment of human rights”. As such in the context of privatization, both the state duty to protect, and the corporate responsibility to respect, human rights are directly relevant to these types of impact.

If they fail to meet basic standards for enjoyment of rights, companies offering services upon which dependent populations rely to realize their rights, are at risk of causing a human rights impact.

The following situations are examples of situations that may give rise to an argument of contributing to impacts:

A private company reduces services to a level that creates an environment in which violence flourishes (e.g. in a private prison);
Aggressive pricing by the company is a factor in rendering the final price of a good or service too high for vulnerable or isolated populations to access it.

Possible Contributions to the SDGs

Providing products and services in the sectors addressed in this red flag can contribute a range of SDGs, including:

SDG 3: Good Health and Wellbeing
- Target 3.8: Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all
SDG 6: Clean Water and Sanitation
- Target 5.1: By 2030, achieve universal and equitable access to safe and affordable drinking water for all.
- Target 5.2: By 2030, achieve access to adequate and equitable sanitation and hygiene for all and end open defecation, paying special attention to the needs of women and girls and those in vulnerable situations.
SDG 7: Affordable and clean energy
- Target 7.1: By 2030, ensure universal access to affordable, reliable and modern energy services
SDG 10: Reduced Inequalities
- Target 10.2: By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status
SDG 11: Sustainable Cities and Communities
- Target 11.1: By 2030, ensure access for all to adequate, safe and affordable housing and basic services and upgrade slums.
SDG 13: Climate action
- Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries
SDG 16: Peace, justice and strong institutions, in particular
- Target 16.6: Develop effective, accountable and transparent institutions at all levels.

SDG 17: (Partnerships for the Goals) envisages partnerships between the public and private sector to be a vital part of the achievement of the SDGs.
- Targets 17.16 and 17.17: Public-private partnerships to be entered into in furtherance of the SDGs, and are relevant in this context to efforts to bring key services such as water and sanitation to under-served populations. However it has been noted that there is a “need to reconcile the call for increased partnerships by the SDGs, [with] the understanding that the definition of service provision should be guided by the maximization of benefits to the achievement of human rights” (see Special Rapporteur on human rights to water and sanitation, here). The SR noted here that, for example, in early 2014, the Portuguese Court of Auditors released a report on the audit of the regulation and management of water service concessions and public-private partnerships and its “main conclusions show that the majority of concessions consistently benefited the private sector to the detriment of municipal budgets and of affordability of services for users”.

Taking Action

Due Diligence Lines of Inquiry

How is the company accessing insights into the experience of people who rely on our services, including through direct engagement with those populations?
How does the company identify who may be particularly at risk from low or inadequate levels of service provision?
How can both internal staff and affected individuals raise concerns through formal channels regarding service levels, without retaliation, and how does the company ensure that these are taken seriously and escalated within the company where they indicate severe risks to people.
Has the company considered how the physical risks associated with climate change might impact the company’s ability to deliver this service reliably and fairly?
- Example in Focus: Energy: Has the company considered how the cost associated with the energy transition towards renewables may affect peoples’ ability to pay for their electricity? Are there progressive tariff structures that recognise differences in income/ability to pay?
How are decisions about cost-cutting or changes to service provision scrutinized for their potential impacts on the rights of dependent populations, and how are independent experts brought into those processes?

Example in focus: Nursing Care Facilities

Do we have staffing levels adequate to provide care? Do we see a correlation between staffing levels and drug administration to patients?
How do we ensure we obtain and document free, prior and informed consent to the administration of drugs?
Do we limit residents’ access to judicial avenues of remedy in our contracts?

Example in focus: Investment in Housing (From SHARE)

How do we ensure that we do not invest in strategies that are dependent upon the exploitation or displacement of low income tenants?
How do we ensure that the principles of equality and nondiscriminatory access to adequate housing are considered at every stage in the housing investment process?
How do we encourage resident participation in an active and meaningful way in decisions related to their housing?

Mitigation Examples

* Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

In Senegal, private company Senegalaise des Eaux (SDE), a subsidiary of Saur International, has been the private partner in a public-private partnership for water management since 1996. Water supply and sanitation in Senegal is characterized by a relatively high level of access compared to the average of Sub-Saharan Africa. The company extended the service to reach low-income settlements, with social tariffs available to ensure affordability, and offers detailed customer surveys and a complaints system (see C. de Albuquerque)
Other mitigation examples have involved action on the part of the state to maintain or reclaim control over aspects of the service provision that intersects with respect for stakeholders’ rights.
- For example, following accusations of abuse of detainees, the BBC reported that the UK Home Office had concluded that contracts for the private provision of services in migrant detention centers were “no longer fit for purpose, given the lack of scope to impose financial penalties and enforce improvements in conditions and treatment” and that it had plans to include in new contracts “performance measures covering staff recruitment, induction, training, mentoring and culture” and “a contractual role for the Home Office to monitor the appropriateness of the use of force against detainees and the care of staff and detainees following an incident”.
- In the nursing care space, US researchers have called for “policy changes that better align private equity incentives with the interests of consumers, or patients” such as by “linking provider payments to performance, which could include metrics like quality and efficiency”.

Alternate Models

Private Equity
- New models of purpose-driven private equity firms state their goals to provide conscious capital driven by their values and the interests of stakeholders; see e.g. Spindletop Capital which aims to provide “purpose-driven healthcare growth equity”; Leapfrog Investments which states that it focuses on “providing critical health services to underserved consumers” in Africa and Asia, and ABC Impact with the stated aim of “provid[ing] growth equity to purposeful companies driving meaningful change in line with the UN Sustainable Development Goals” including in the fields of water solutions and healthcare and education, and measuring outcomes through an impact measurement model.
- A 2018 legal proposition in Sweden to cap returns on invested capital in publicly funded services to 7% was directly related to concerns about private equity involvement in sectors like nursing homes and schools. Ultimately unsuccessful, the initiative aimed to limit excessive profits and ensure more funds were reinvested into improving service quality.
The Global Alliance for Banking on Values provides an overview of how values-based banks are working with affordable housing providers, “from developers to social organizations or public institutions, for reasons that range from viewing housing as a fundamental right, creating environment friendly and sustainable communities, or protecting disadvantaged communities such as migrants and individuals and families living on low incomes”. For example, GABV notes that in Germany, Umweltbank has financed the “City quartier Güterbahnhof” in the city of Tübingen wherein 93 out of the 157 flats are categorized as social housing.

Other Tools and Resources

General

University of Leeds paper (2018) discusses privatization and the exacerbation of inequality in the context of a various once-public services (e.g. water, electricity, transportation): Privatization, Inequality and Poverty in the UK: Briefing prepared for UN Rapporteur on extreme poverty and human rights
The OECD’s Infrastructure Anti-Corruption Toolbox (I ACT) is a holistic multi-stakeholder approach to empowering actors across the infrastructure value chain to prevent, detect and report corruption.
DIHR’s AAAQ (Availability, Accessibility, Acceptability and Quality) toolbox aims to support the operationalization of the rights to water, sanitation, food, housing, health, and education. Designed with a multi-stakeholder approach in mind, the open-source Toolbox offers common methodologies for all stakeholders as well as tailored tools for states, rights-holders, business, civil society and National Human Rights Institutions (NHRIs).

Private water and sanitation services:

The Special Rapporteur on the human rights to water and sanitation will focus his 2020 report on “privatization and the human rights to water and sanitation.” See concept note and progress of public consultations here.
Shift, Pacific Institute and UN Global Compact (2015) Guidance for Companies on Respecting the Human Rights to Water and Sanitation: Bringing a Human Rights Lens to Corporate Water Stewardship.

Private Prisons/ Detention Centers:

Human Rights Advocates submission on Article 9 of the International Covenant on Civil and Political Rights discusses the effect of the profit motive on conditions in private prisons as a part of its “focus on what governments are required to do to avoid having detention becoming arbitrary when a person’s liberty is turned over to a private entity.”
Human Rights Watch (2017) Code Red: The Fatal Consequences of Dangerously Substandard Medical Care in Immigration Detention a report analyzing 15 deaths in immigration detention custody in the US, concluding that “healthcare and oversight failures … present in so many of them” point to “larger, systemic deficits in immigration detention facility health care” in both publicly and privately run facilities.

Residential Care Facilities

Human Rights Watch (2018) “They Want Docile”: How Nursing Homes in the United States Overmedicate People with Dementia.

See also below under Private Equity

Private Equity

Principles for Responsible Investment (2020) “Aligning private equity investment practices and structures with ESG goals”
Knowledge at Wharton (2024) “How to Align Private Equity Motives with Nursing Home Outcomes”
Bernaz, (2023) “Business Strategy as Human Rights Risk: The Case of Private Equity”: This article (which cites Shift’s Business Model Red Flags) applies business and human rights principles to private equity business strategy and concludes that “the underlying model makes these harms inevitable, and therefore […] the PE model itself should be considered a human rights risk”.
The Predistribution Initiative: “[PDI] is a nonpartisan, multistakeholder non-profit that works with investors and their stakeholders to improve financial analysis and investment decision-making processes in ways that more adequately value workers, communities and nature”.

Financialization of Housing

Office of the High Commissioner for Human Rights, Special Rapporteur (SR) on the Right to Adequate Housing. Financialization of Housing. This portal includes reports from the SR, including country-specific reports, resources including a documentary, and a response from Blackstone to a letter on the subject from the SR.
Responsible Investment Organisation SHARE has a portal on affordable housing, and Principles and Progressive Framework for Responsible Investment in Housing

Citation of research papers and other resources does not constitute an endorsement by Shift of their conclusions.

Red Flag 3. Project timelines that undermine consultation with communities

RED FLAG # 3

The business’s commercial success substantially depends upon construction or commencement of projects with timelines that do not allow sufficient time for consultation with groups affected by the projects.

For Example

Extractives projects being planned and costed such that there is not adequate time for local communities to be consulted about potential negative impacts, nor for mitigations to be put in place.
Infrastructure projects, including renewable energy developments, that are “fast-tracked” or authorized and completed before local communities are able to express concerns, seek mitigation for negative impacts or secure appropriate benefit-sharing agreements.
Mega-events (sporting, exhibitions, fairs) that have tight timelines from project award to delivery of the event.

Higher-Risk Sectors

Extractives – particularly mining and oil/gas
Construction – particularly large infrastructure projects, including linear infrastructure such as railways, highways, transmission lines, particularly in geographies that don’t require or actively discourage public consultation
Agriculture – particularly large-scale operations such as rubber or biofuel feedstocks
Energy utilities – particularly those that involve infrastructure such as wind or solar farms, hydroelectric dams, transmission lines and related infrastructure
Sporting bodies and sporting associations – particularly in the organization of mega-sporting events
Banks, private equity and development finance institutions that finance projects in the above categories and require a fast return on investment, incentivizing project teams to work within compressed schedules to reach key milestones and start generating revenue as quickly as possible.

Questions for Leaders

To what extent are our project timelines able to accommodate engagement with groups impacted by the project?
How do we know we are identifying and engaging with the appropriate stakeholders?
Do we have sufficient understanding and internal capacity to engage with groups affected by the project?
How does the company ensure that potentially impacted communities have access to safe and effective ways to raise concerns with the company throughout the project lifecycle?

Understanding Risks and Opportunities

Risks to People

Research in the mining sector shows that often there is a tension between “technical time” – the time needed for the construction or completion of a project – and “social time” – the time needed to address community concerns related to the project.

Even when companies see the importance of consulting affected communities, their approaches are not always effective.

A survey of construction project managers shows that while they believe engagement with the local community improves relationships, they see it as a burdensome, arduous, time consuming and costly process.
A Chatham House report with perspectives from the extractives sector shows that even though setbacks from break-downs in community relations are costly, community engagement often fails because it is seen as a “distraction,” as a box-ticking exercise, or because community relations officers are marginalized or only involved when things go wrong.
Recent research suggests that while more companies are making commitments to free, prior and informed consent (FPIC), implementation is still weak. Further, the UN Special Rapporteur on the rights of Indigenous Peoples has commented that ongoing debates by corporations and governments about FPIC “lose sight of the spirit and character of these principles” which seek to end historical models of decision-making that have tended to exclude Indigenous Peoples.
In a 2024 book exploring the various facets of meaningful stakeholder engagement, the authors highlight that “several studies have found that the practice of stakeholder engagement has been characterized by processes that are often out of touch with the experiences of affected people whose daily lives intersect with the activities of industry.”
A 2019 study of Nigerian infrastructure projects highlights significant barriers to meaningful engagement, such as failure to understand stakeholders’ needs and expectations, late identification of stakeholders, failure to identify key stakeholders, failure to identify potential conflict areas, poor understanding of effective stakeholder engagement and timelines misaligned with stakeholders expectations.

Even companies or financial institutions that have policy commitments to community engagement can sometimes have business models that depend on project timelines which do not allow for sufficient time for consultation with affected stakeholders.

The low carbon transition is leading to a growth in business models that carry this risk. The urgency of the global climate challenge and the imperative of transitioning as quickly as possible to a lower carbon economy have, in certain cases, resulted in states and companies “fast-tracking” development of transition mining projects and/or low emissions energy projects. A 2022 study found that, in the case of energy transition minerals, not only is there a risk that procedural safeguards for consultation and consent will be diluted, but also that the future supply of energy transition minerals will exacerbate social inequalities in already vulnerable locations. For example, an estimated 54% of energy transition minerals are located on or near Indigenous Peoples’ land. An Amnesty International study looking at the impact of cobalt and copper mining expansions in the DRC found that many communities around the key mining locations have endured significant impacts as a result of energy transition mineral mining, including the absence of any community consultation and forced evictions. On the renewable energy front, several jurisdictions, including India, South Africa, and Japan, have adopted legislation intended to speed up project development. Unfortunately, such legislation often exempts project companies from or reduces requirements for prior consultations with communities and/or enables forced expropriation of land.

A business model focused on expedited timelines that don’t allow for sufficient consultations, can lead to the following risks to people:

Loss of Livelihood and Negative Health Impacts: In Mexico, Indigenous communities near a newly built dam in Sonora were not consulted or informed when the dam started to be filled. As the dam was filled, the communities reported they had not yet been relocated, that the dam had flooded areas where they used to access medicinal vegetation and that the project had cut road links to other communities. In Myanmar, opposition to the Myitsone dam on the Irrawaddy river forced the government in 2011 to put the project on hold. The 3.6 billion USD dam was to be financed by China. The dam itself would displace thousands of people and affect fishermen and communities downstream. The reservoir was expected to flood an area the size of Singapore. Local communities reported losing their farmland, which was the source of their income. In addition, the dam would affect cultural rights, as the Myitsone area is believed to be the birthplace of the Kachin people. In recent years, fears that the project may be revived have sparked new protests.
Forced Displacement: In Brazil, residents of Vila Autódromo resisted displacement to clear land for construction of the Olympic Park in Rio de Janeiro for the 2016 Rio Olympics. Although the majority of the residents had been offered compensation, others preferred not to leave their homes and felt the government’s plans to go ahead with construction amounted to forced eviction. In 2024, a French coalition of community associations issued a report asserting that nearly 20,000 people had been forcibly displaced from informal housing between April 2023 and September 2024 as part of preparations for the 2024 Paris summer games. Many of these people were migrants from places like Sudan, Eritrea or Afghanistan that had sought and were awarded asylum in France, but had precarious living arrangements. More generally, research shows that in the 20 years to 2007, approximately 2 million people in different countries were displaced by the Olympic Games. And this phenomenon is global – occurring in Chinese and Brazilian cities hosting sporting events, as well as European cities, such as Paris, Berlin and Barcelona. Non-sporting mega-events have also led to forced evictions and displacement: for example, 18,000 households were displaced in Shanghai, China, in preparation for the World Expo 2010 and early reports indicate that evictions are occurring around the site of World Expo 2025 in Osaka, Japan. In Saudi Arabia, there have been reports of evictions of members of the Howeitat tribe from their homes and traditional lands to make way for the NEOM project, which describes itself as the world’s first cognitive, smart city.
Impacts on water availability and quality: In the US, the Standing Rock Sioux and other American Indian tribes raised concerns that the Dakota Access Pipeline could damage their water supply and cultural heritage. In 2020, a court ordered a temporary shutdown of the pipeline, finding that the environmental impact assessment had been inadequate.
Environmental Damage: The lack of consultation in the construction of a tourist train in Yucatán, Mexico raised concerns that the new towns that will be created along the line will put pressure on biodiversity and nature reserves which are managed by local communities.
Loss of Cultural Heritage: In Australia, the Wangan and Jagalingou community challenged the provision by Siemens of rail signaling to the Adani coalmine, stating that they had not provided approval for the project and the mine would cause environmental damage and limit their access to ancestral ceremonial grounds. In Cambodia, communities from Ratanakiri province filed complaints with the Compliance Advisory Ombudsman (CAO) of the International Finance Corporation (IFC) related to the IFC’s investment in Vietnamese rubber company Hoang Anh Gia Lai (HAGL). Local communities complained that HAGL’s use of its rubber land concessions had resulted in loss of forest and grazing land, destruction of burial grounds, and lack of access to resin trees and non-timber forest products necessary to sustain livelihoods. Moreover, communities reported that no effort was made by HAGL to obtained their free, prior informed consent, involve affected communities in the decision-making process, or provide adequate information to them. As of 2025, the case is still ongoing.
Violation of Indigenous Peoples Rights: It is important to highlight Indigenous Peoples as a vulnerable group among affected stakeholders. Failure to obtain FPIC can undermine Indigenous Peoples’ right to self-determination. It can also undermine their access to other rights such as to life, liberty, security, culture, language, spirituality, education, information, employment, etc. A 2023 study found that Indigenous Peoples are affected in at least 34% of all documented environmental conflicts worldwide. More than three-fourths of these conflicts are caused by mining, fossil fuels, dam projects, and the agriculture, forestry, fisheries, and livestock sector.

Risks to the Business

Business models that substantially depend on project timelines which do not allow for sufficient time for consultation with affected stakeholders can lead to the following risks to companies:

Financial, Legal and Reputational Risks:

A study digging into the Costs of Conflict for extractive companies identified two broad “cost” categories – costs associated with preventing or responding to conflict (e.g., security, risk management, personnel costs from time spent managing the conflict) and costs associated with the outcomes of conflict (e.g., project modifications, redress, material damage, lost productivity, impact on capital, reputational impact and impacts on personnel) and found that a major, world-class mining project can suffer costs of USD20M per week due to lost sales as a result of temporary shutdowns or delay stemming from community conflicts.
First Quantum Minerals was granted a 20-year extension to their copper mining concession in Panama on an expedited basis by the Panamanian government in 2023, allowing little or no time for consultation with affected stakeholders. In response, protests erupted across Panama, including blocking the port that serves the mine, effectively shuttering the mine site. Panama’s Supreme Court then declared the company’s contract unconstitutional and ordered the closure of the mine, which is estimated to cost USD800 million. Discussions around the ultimate fate of the mine are ongoing, but even if temporary, the economic cost of the lucrative mine’s shutdown for both FQM and the Government of Panama has been significant, including lost production and export income. FQM was reportedly spending USD11-13 million/month on labor and maintenance, with no permit to export any of the stockpiled material.
A 2021 study by ODI found that social risk mitigation cost about 2% of project costs versus potential financial damages of around 24-37% of project costs when projects failed to achieve social license to operate.
In 2024, after a 3-year-long legal dispute, a Parisian court ruled that a civil lawsuit brought by Mexico-based Indigenous communities against EDF can go ahead. The issues underpinning the lawsuit include violation of land rights and inadequate community consultation. The case was filed under the French Corporate Duty of Vigilance Law, designed to hold French companies accountable for abuses overseas.
Rapid decision-making that left no time for community consultation underpinned the 2020 destruction of the Juukan Gorge Indigenous cultural heritage site as part of Rio Tinto’s mining operations in Western Australia. The fall-out of this event included intense media scrutiny for Rio Tinto, the resignation of three members of the company’s senior leadership team and two board members, as well as a high-profile parliamentary inquiry. In 2022, the company settled for an undisclosed sum with the impacted Indigenous communities.
A 2020 study examined the cost and material losses experienced by ETP and other companies with an ownership stake in the Dakota Access Pipeline (DAPL), which was subject to sustained opposition from Indigenous groups and characterized by widespread national and international protests. The owners lost revenue, operating costs and legal fees estimated at US$7.5 billion, in addition to material downward pressure on the company’s share price.
In early 2024, a US federal judge ordered the dismantling of Enel’s 84 turbine operating wind farm, as, according to the decision, the Oklahoma-based project did not undertake sufficient community consultation or respect the land rights of Indigenous Peoples in Oklahoma, US. This tear down is estimated to cost the company US$260 million, in addition to any damages awarded to the Osage Nation who challenged the wind farm.
In 2024, Indonesia’s highest court ruled in favor of a community’s petition to revoke the environmental permit for Dairi zinc-lead mine – a decision based partly on lack of citizen participation in the project’s development.
Recent disputes over hyperscale data centers in both the U.S. and UK illustrate the risks to business posed by expediting project development processes. In the US, a Virginia judge voided approval for the 1,700-acre “Digital Gateway” project after finding procedural failings in the approval process, following a “rushed” and divisive 27-hour public hearing where residents opposed the project’s proximity to historic and residential land. Similarly, in the UK, a planned 90 MW data center on protected Green Belt land near London is facing a legal challenge for bypassing environmental safeguards and community concerns.

Operational Risks Linked to Social Unrest:

From the riots related to the Rio 2016 summer Olympics to the deaths of demonstrators protesting the Conga Mine in Peru, social unrest can create operational risks for the company as well as security risks for company staff and local communities.
A 2020 study published in the journal Environmental Research found that opposition to fossil-fuel and low-carbon energy projects are having important operational impacts. Of the 649 projects reviewed that had encountered some form of social resistance, more than 25% were “shelved, suspended or delayed”, suggesting significant operational risk for project proponents, in addition to reputational hits or financial costs incurred, as a result of the media attention and lost time spent on project development, respectively.

What the UN Guiding Principles say

Companies can cause adverse human rights impacts when they fail to carry out meaningful consultation with affected stakeholders and their actions negatively affect human rights. A failure to allow time for the conduct of Free, Prior and Informed Consultation (FPIC) with affected Indigenous communities, or to ensure that FPIC with these communities has been conducted by others, is itself a breach of Indigenous people’s human rights. More generally, a company may cause human rights impacts when it sets timescales which preclude consultation with affected communities as part of a risk assessment and mitigation process, and the company’s actions then have negative impacts on communities such as forced displacement, depriving communities of access to water, food or livelihoods or preventing them of entering cultural sites.
Organizations (including companies, mega-event organizers and financial institutions) can contribute to adverse human rights impacts when their business models create demand for speed in the delivery of projects by third parties, and the demand for speed prevents third parties from carrying out meaningful consultation with local communities, resulting in adverse human rights impacts.

Possible Contributions to the SDGs

Addressing impacts on people associated with this red flag can contribute to ensuring responsible, inclusive and participatory and representative decision-making at all levels (Target 16.7 of SDG 16: promoting peaceful and inclusive societies).

The results of consultation with groups affected by projects can enable companies to better understand and mitigate risks to people, which can contribute to the following SDGs:

SDG 1: End poverty in all its forms everywhere. Meaningful consultation can help ensure that people – particularly vulnerable communities – have equal rights to economic resources, including ownership and control over land.
SDG 2: Zero hunger. Meaningful consultation can help agricultural productivity and incomes of small-scale farmers, in particular women and Indigenous communities, including through secure and equal access to land and productive resources.
SDG 3: Good health and wellbeing. Meaningful consultation can help protect stakeholders’ health by preventing negative impacts such as pollution of soil, air or water sources, or impacts from poor working conditions such as fatigue, stress and accidents.
SDG 6: Clean water and sanitation. Meaningful consultation can help prevent pollution of water sources.
SDG 7: Affordable and Clean Energy. Meaningful consultation can help to ensure that clean energy projects are advanced swiftly and with public support.
SDG 13: Climate action. Meaningful consultation can help to ensure that the transition to a lower carbon economy is fast because it is fair.

Taking Action

Due Diligence Lines of Inquiry

Do we understand the local context and the potential ways in which our project can impact on people?
Do we have a process to sensitize our staff about local issues and the local context?
Do we know which stakeholders we need to consult and how to structure the consultations to make them meaningful and accessible?
Have any vulnerable or historically marginalized groups been identified in or around the project site?
Do we know if groups that self-identify as Indigenous Peoples are impacted by the project and, if so, do we understand how that will impact project timelines?
Do those responsible for community engagement have the requisite skills and experience for engaging with affected stakeholders, including Indigenous Peoples?
Do our project plans allow sufficient time for consultation to take place?
Do we actively support community relations managers to carry out the consultations?
Does advice from community relations managers get reported to the executive?
Are we prepared to review the project plan based on insights from the consultations?
Do we measure and/or have we accounted for the cost of conflict with local communities?

Mitigation Examples

* Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

In Australia, the co-development of shared standards (e.g., Infrastructure Engagement Excellence Standards) has provided government, industry and communities with a common basis upon which to understand, participate in and assess meaningful community engagement or, in the case of the Best Practice Principles for Clean Energy Projects, to help support indigenous communities in seeking to share the benefits of Australia’s clean energy sector expansion.
Encouraging active citizenship by building the capacity of civil society to unlock productive dialogue between the company and local communities. For example, Oxfam’s NORAD project in Ghana, Tanzania and Mozambique to improve petroleum governance.
Dialogue tables co-owned by companies, local communities and stakeholders (civil society) as spaces for respectful, patient engagement and joint problem-solving. The dialogue tables can be facilitated by neutral third parties, which can help companies and communities build trust in the process. For instance, Anglo American participated in dialogue tables in the Quellaveco project in Peru. This enabled the company to make commitments to the local community on water management, environmental protection and social investment.
A mediation process between Alcoa and an affected Brazilian community on land use sharing for mining and community was established and mediated by Brazilian government authorities and ultimately resulted in benefits and compensations for all parties.
Monitoring agencies set up between representatives of Indigenous peoples, local government and businesses to enable joint decision-making and monitoring compliance with the terms of the agreement between the company and local communities. The Snap Lake Environmental Monitoring Agency was set up by DeBeers, the Government of the Northwest Territories of Canada and a number of aboriginal groups. Its board was comprised of representatives of Indigenous groups, and the agency functioned as a “watchdog” to monitor environmental compliance by DeBeers.
Tailored approaches that respond to community concerns and go beyond compliance can help companies and communities build trust. In New Zealand, Newmont Waihi Gold (NWG) wanted to expand their gold mining beneath homes of the local community. The company realized that a primary concern of the community related to property damage. In response, NWG set up a number of platforms that went beyond the legal requirements to provide transparency and enable the community a role in decision-making. These included an independent ombudsman for property matters, a policy to guide how the company would respond to matters of property damage, and a community forum with members of the community, the company and local government.
Empowered community liaison officers who, in addition to being approachable and personable towards the local community, can take decisive action when concerns are raised. For instance, in Bolivia, Total empowered a Community Liaison Officer to lead dialogue and participatory engagement with Indigenous groups in areas of complex land tenure, improving stakeholder communication and fostering transparent, inclusive social and environmental assessments. This approach, part of a broader human-rights strategy, helped to build trust and align company operations with community expectations.

Alternative Models

The Indigenous Peoples’ Rights International (IPRI) and the Business & Human Rights Resource Centre are making the case for a renewable energy transition that centers Indigenous Peoples’ rights, interests and prosperity, as determined by them, in pursuit of a global transition that is fast because it is fair and sustainable. Among other resources, the report outlines emerging benefit-sharing modalities with real-world examples of where and how they are being deployed, as well as recommendations for regulators, renewable energy developers and financial institutions.
In Alaska, the Red Dog Mine operation, which sources nearly 5% of global zinc supply, was developed through an operating agreement between Teck Resources and 15,000 Iñupiat shareholders of NANA Corporation.
One of the largest seafood companies in the southern hemisphere is 50% owned on behalf of the Māori people of New Zealand and 50% by the Japanese company Nissui.

Other Tools and Resources

General

Shift, UN Global Compact Netherlands & Oxfam. Doing Business with respect for human rights – Chapter 3.7: Stakeholder Engagement – Making it Meaningful
Shift (2018) Engaging Affected Stakeholders: Evaluating the quality of processes for company-community engagement
Investor HREDD Precision Tools (2025) Stakeholder Engagement Guide (beta)
Task Force on Nature-related Financial Disclosures (2023) Guidance on Engagement with Indigenous Peoples, Local Communities and affected stakeholders
Science-based Targets Network (2024) Stakeholder engagement and science-based targets for nature
UNEP Finance Initiative (2025) Human Rights Toolkit: Infrastructure
Buhmann, Karin et al. (2024) The Routledge Handbook on Meaningful Stakeholder Engagement
Amazon Watch (2023) Respecting Indigenous Rights: An Actionable Due Diligence Toolkit for Institutional Investors
Equator Principles (2021) To Enhance Access to Effective Grievance Mechanisms and Enable Effective Remedy
Equator Principles (2020) Guidance Note: Evaluating Projects with Affected Indigenous Peoples
IFC (2007) Stakeholder Engagement: A good practice handbook
IFC (2007) Note on ILO Convention 169 and the private sector

Sector specific:

Business and Human Rights Resources Centre (2024) Stop and listen: Pathways to meaningful engagement with rightsholders in the global rush to mine for transition minerals
Business and Human Rights Resource Centre (2024) Exploring Shared Prosperity: Indigenous leadership and partnerships for a just transition.
IIED paper (2016) Meaningful community engagement in the extractives sector

Citation of research papers and other resources does not constitute an endorsement by Shift of their conclusions.

Red Flag 1. Lowest cost goods or services in ways that put pressure on labor rights

RED FLAG # 1

The business’s commercial success substantially depends upon offering lowest cost goods or services such that it becomes economically challenging for the company or suppliers to respect labor rights.

FOR EXAMPLE

Selling apparel and other consumer goods premised on cheapest prices for customers, such that increases in production costs are absorbed through the wages of already low-paid workers
Locating (and relocating) production to countries with lowest wages

HIGHER-RISK SECTORS

Commerce sector, in particular “value brand” retail companies, including apparel retail
Textiles, clothing, leather and footwear sector
Food and beverage sector

Questions for Leaders

Buyers

Do low costs in the company’s sourcing locations flow in part from a lack of investment in basic protections for workers? How does the company mitigate attendant risks to people?
How does the company know if its buying practices influence suppliers’ ability to meet its expectations on human rights? Does the company seek out feedback from suppliers in this regard, and act on it?

Suppliers

How does the company ensure fair working conditions for its workers, both direct and those recruited through labor providers?
How does the company engage or collaborate with its buyers on their buyers’ purchasing practices (e.g., lead times, pricing, order volumes)?

Understanding Risks and Opportunities

Risks to People

Where the business model is premised on securing cheapest prices for customers (as opposed to other differentiating factors such as quality or service), retail prices often remain constant or reduce, even when costs of production, raw materials or demands for high-speed or just-in-time delivery increase. In such cases the company may use its purchasing power to place heavy price pressure on suppliers working on narrow margins, such that costs are passed onto the most vulnerable people in supply chains – such as factory workers, including migrant workers, women workers, producers and small-holder farmers – affecting their livelihoods and those of their families. (Right to fair/living wage; Right to adequate standard of living)
Suppliers under excessive price pressure may be incentivized to demand excessive overtime from workers, not pay or suppress wages or overtime, or not provide safe working conditions. Risks are exacerbated when the company provides little or no commitment to long-term sourcing, disincentivizing investment in improving working conditions. (Right to just and favorable conditions of work; Right to Health)
Risks are greatest where the company locates (and relocates) production to countries where minimum or industry wages leave workers in poverty and workers lack adequate protections in law or in practice. These same countries are then incentivized to keep labor costs low to maintain competitive advantage and continue to attract foreign investment from multinational companies. (Right to an adequate standard of living; Right to fair/living wage)
Business models centered on delivering low-cost goods and services often impose intense cost pressures on suppliers, leaving little room for investments in worker protections or sustainable practices. As the world transitions to a lower carbon economy, many companies are facing pressure to decarbonize across their value chains. Buyers’ supply chain emissions reduction targets can exacerbate the inherent pressures of the low-cost goods and services business model, when responsibility for emissions compliance, including associated costs, are passed on to suppliers without guidance or financial support for making the necessary emissions reductions. To implement low carbon workflows or investments to satisfy buyers’ emissions requirements in an already cost-constrained environment, suppliers may reduce workers’ wages, require excessive overtime, or underinvest in workplace safety, particularly in regions with weak labor protections. Other buyers’ decarbonization strategies that could negatively impact supply chain workers if not managed appropriately, include:
- shifting sourcing patterns (e.g., supply chain consolidation or diversification, “agile” supply chains, or nearshoring/reshoring);
- automating or introducing new low carbon technology or machinery, and;
- circular economy measures (e.g., reducing production, reducing waste, renewable or recycled materials).
Further, as the physical impacts of climate change intensify — including rising temperatures and more frequent extreme weather events, such as storms and flooding — workers in supply chains face escalating risks, particularly in labor-intensive sectors like fashion & textiles, and food and beverage. In environments where employers, under pressure to keep production costs low, are unwilling or unable to invest in climate change adaptation measures, such as heat adapted conditions, adjusted working hours, or paid leave during extreme weather, workers endure growing exposure to heat stress, dehydration, or accidents. Productivity losses – already shown to be linked to extreme heat – impact employers’ costs and output potential, as well as workers’ wages and job security. A study by the Global Labor Institute found that without significant investment in climate change adaptation, physical climate impacts on workers in the fashion sector will only get more pronounced as global temperatures rise, with increasingly devastating impacts on workers and job availability in major production hubs like Vietnam and Bangladesh. These impacts will be particularly acute for groups that are already more economically and socially vulnerable, such as migrant workers, women, or smallholder farmers. Thus, failure to adapt or maladaptation has the potential to further exacerbate the negative risks to people inherent in this business model.

Risk to the Business

Financial, Reputational, and Operational Risks: Companies operating in a hyper flexible sourcing context (i.e. where sourcing can move quickly and easily between multiple locations) may benefit from lowest prices, but face reputational risks linked to the ease of exploitation of low-skilled, low-paid workers in such sourcing geographies with minimal protections for them. The short-term and remote nature of many supplier relationships can reduce buyers’ leverage to do anything about abusive behaviors in their supply chain when they are highlighted by civil society, consumers or their own audits.
- In October 2022, a UK documentary alleged exploitative labor practices in Shein‘s supply chain. The allegations highlighted systemic issues within the ultra-fast fashion model, which emphasizes rapid production and low costs, often at the expense of worker welfare. In response, Shein pledged a $15 million investment over three to four years to improve working conditions and oversight. Despite these efforts, subsequent reports, including Shein‘s 2023 Sustainability Report, disclosed ongoing concerns, such as instances of child labor and excessive working hours within its supply chain. These findings have continued to attract scrutiny from regulators and human rights organizations (see investor briefing here), impacting Shein’s attempts to pursue public listings in major markets.
- In 2020, a UK-based low cost online retailer, Boohoo Group, faced significant backlash after reports emerged of labor rights abuses in its UK-based supply chain. The scandal led to a sharp decline in Boohoo‘s share price (wiping more than GBP1.5B off its valuation over a week-long period) and prompted several retailers to drop its products. The company commissioned an independent review, which confirmed the allegations. While there has been some follow-up to address the issues identified, the company faces ongoing criticism regarding systemic labor violations in their supply chain. Further, in May 2024, 49 of its investors filed a legal claim seeking GBP100M in damages alleging the company made “untrue or misleading statements and failed to disclose material information” about the matter to the market.
- In July 2020, Violet Apparel, a Cambodian factory owned by Ramatex Group, closed “with less than one week’s notice”, terminating 1,284 workers without paying USD1.4 million in legally mandated severance. Although, a workers rights organization alleges that Nike-branded products were produced there, Nike maintains it hasn’t sourced from Violet Apparel since 2006. However, more than 50 human rights groups and over 70 investors have urged Nike to ensure compensation, alleging failures in supply chain oversight and due diligence.
- An increasing number of institutional investors view payment of a living wage as a material investment factor linked to financial, reputational, and operational performance. In Europe, the Platform Living Wage Financials coalition—comprising 22 financial institutions overseeing over €7 trillion in assets—posits that paying a living wage can reduce operational risks, particularly in company value chains. Meanwhile, UK investors such as Scottish Widows, Axa and Aviva Investors have recently backed shareholder resolutions linking living wage commitments with long-term business resilience, recognizing that not paying a living wage poses risks to talent retention, productivity, and shareholder value.

- Tragedies affecting workers in the supply chains of global brands that benefit from low cost production implicate entire industries: in the wake of the Rana Plaza collapse, companies sourcing from Bangladesh that did not have garments produced in at Rana Plaza were equally affected by campaigns that focused on the complicity of the “entire industry” in conditions leading to the tragedy.
Operational, Regulatory and Reputational Risks: Companies may find themselves unable to guarantee traceability as suppliers under extreme price pressure often sub-contract production, leading to a longer, less transparent and less controllable supply chain.
- In December 2024, a report by China Labor Watch revealed that coffee farms supplying Nestlé and Starbucks were engaging in labor practices that violated both companies’ sourcing standards. The investigation uncovered that the drive to meet demand for lower cost coffee products resulted in suppliers sub-contracting from smaller, uncertified “ghost farms” at which there were recorded instances of child labor, excessive working hours, lack of formal contracts, and inadequate safety measures. This resulted in operational, regulatory and reputational risks for Nestle and Starbucks who were: (i) accused of contravening their own ethical sourcing standards, (ii) at risk of non-compliance with supply chain regulation in key markets, and (iii) making headlines in major news outlets.
Financial Risk and Business Opportunity Risk: Data shows consumer concerns about lowest price apparel goods, for example, and an increase in the number of consumers, particularly younger consumers and higher income consumers, who state that they would be willing to pay more for ethically sourced, sustainable goods. This suggests that there could be important shifts in consumer preferences that will impact lowest cost goods. Failure to address this may have financial implications including in the form of missed opportunities to adapt.
Financial and Operational Risks: The Global Labor Institute at Cornell University published a study mapping out the supply chains of six unidentified low cost global apparel brands operating in Bangladesh, Cambodia, Pakistan and Vietnam. The study found that all six would be hit materially by extreme heat and flooding, which could “erase USD 65 billion in apparel export earnings” by 2030, as workers struggle under high temperatures and factories close.
Regulatory Risk: Operating on a low cost goods and services business model can be associated with regulatory risk. Regulation has been tabled in some jurisdictions to reduce waste associated with low cost goods. Some examples include:
- In 2025, France’s Senate approved a law seeking to curb advertising by companies selling garments with extremely rapid turnover, low cost and short lifespans, with enforcement now awaiting passage through a joint committee and presidential signature. It targets all media advertising—including digital, traditional, and influencer ads—and is proposed to take effect on January 1, 2026.
- Noting, among other things, that “garment workers face the brunt of the [fast fashion] industry’s race to the bottom”, lawmakers introduced legislation during New York’s 2025/26 legislative session seeking to mandate environmental and social due diligence for the apparel and footwear sectors for companies with over $100 million in global revenue, requiring supply chain transparency and due diligence, with penalties for non-compliance.
- The EU has agreed on binding rules that force brands—especially low-cost, fast-fashion producers—to finance textile waste collection, sorting, and recycling under an extended producer responsibility system, with fees targeting ultra-fast production. From January 1, 2025, all EU member states are required to implement separate textile collection, while digital passports and stricter eco-design standards further mandate durability, recyclability, and supply-chain transparency and traceability.

What the UN Guiding Principles Say

The UNGPs note that companies should “strive for coherence between their responsibility to respect human rights and policies and procedures that govern their wider business activities and relationships [including] …. procurement practices” (Principle 16, Commentary).

Where the incentives for impacts are embedded in the buying company’s purchasing practices, it may systematically rewards buyers for placing extreme pressure on suppliers, and punish those that invest in protections for workers in ways that raise their costs (and therefore prices to the buying company). In such circumstances, the company may be considered to contribute to impacts on supply chain workers. Similarly, where the company executes a strategy to benefit from wages below a living wage, including, in some cases, by lobbying against minimum wage increases, it may contribute to the impacts experienced by workers.

Possible contributions to the Sustainable Development Goals (SDGs)

Addressing impacts to people associated with this red flag can contribute to, inter alia:

SDG 1: End Poverty in All its Forms Everywhere, in particular
- Targets 1.1 and 1.2 on eradicating extreme poverty and reducing by half the number of people living in poverty (according to national definitions).
SDG 8: Decent Work and Economic Growth, in particular
- Target 8.8 on protecting “labor rights and promot[ing] safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment.”
SDG 10: Reducing inequalities within and between countries
This goal becomes relevant as profit margins and returns are concentrated at the buyer/investor level, with less and less value making it into the pockets of the poorest in the supply chain
SDG 12: Responsible Consumption and Production, in particular
- Target 12.5 on substantially reducing waste generation through prevention, reduction, recycling and reuse.

Taking Action

Due Diligence Lines of Inquiry

For Buyers:

Do our contracting/tendering processes unduly incentivize cost cutting or disincentivize supplier investment in rights-related improvements (e.g. annual bidding for contracts; procurement decisions based on lowest-cost alone). How do we ensure that lowest price bids reflect greater efficiencies rather than externalization of costs onto supply chain workers? Have we considered the five principles of responsible purchasing that Better Buying has identified that affect a supplier’s ability to provide good working conditions?
How do we incentivize and reward our in-house buyers and how do they perceive the factors on which they are judged to succeed? Do we consider factors other than lowest price (e.g. relationship and capacity building; adherence to sustainability codes etc.)?
Do our in-house buying staff have sufficient knowledge, incentives and support to assess how and when their decisions will place human rights at risk, and to know from whom to seek assistance when they do?
How do we know whether our buyers follow our processes, rules or guidelines in practice when engaging or contracting with suppliers?
Do we engage with our suppliers in ways that help us understand how far they can go to meet our demands while still respecting the rights of their workers? Do we work with suppliers in countries of production to increase worker protections?
Do we take a short term, transactional approach to supply chains or do we develop supply chain partnerships?
How are we engaging with our industry peers to uphold human rights in our shared supply chains, recognizing this is a pre-competitive issue? Are we engaging in multi-stakeholder initiatives that are actively working to improve wages and livelihoods in the supply chain?

How have we engaged with our suppliers on our GHG emissions reduction strategies and the potential implications those strategies could have for supply chain workers?

How are we integrating the potential impacts on supply chain workers of physical climate change impacts (e.g., extreme heat and flooding) into our expectations for suppliers?

For suppliers:

Do we have sufficient knowledge, incentives and support to assess how and when buyer decisions will place human rights at risk?
Do we engage regularly with our buyers to help them understand the implications of their demands on respecting the rights of workers?
Do we provide constructive feedback to buyers on purchasing practices that have negative impacts on workers, either through direct engagement or through buyer ratings services?
How have we explored using legislative requirements (e.g., from the EU) to engage with buyers on their purchasing practices and changes that can support more effective due diligence?
Do we understand the potential impacts of buyers’ climate-related emissions reduction requirements on our workforce and have we communicated them to the buyers?
How have we factored physical climate change impacts (e.g., increasing frequency, duration and severity of extreme heat) into our operations and expectations of our workers?

Mitigation Examples

*Mitigation examples are current or historical examples for reference, but do not offer insight into their relative maturity or effectiveness.

Increasing leverage through collaboration: Given the systemic nature of the issues, collaborating with other companies may be one of the most effective ways to affect change. For example:
- ACT is a coalition of over 40 global apparel brands, working alongside IndustriALL Global Union to secure living wages through industry-level collective bargaining. Building on the original Memorandum of Understanding, brands are committed to ensuring their purchasing practices support higher wages via five key commitments—including itemized labor costs, fair terms, responsible exit strategies, and mandatory training—underpinned by the ACT Labour Costing Protocol and a robust Accountability & Monitoring Framework. In May 2024, ACT and IndustriALL signed bilateral support agreements focused on wage improvements and better working conditions in the Cambodian garment and footwear sector.
- Launched in 2023, the UN Global Compact Forward Faster initiative calls on companies to commit to ensuring 100% of their employees earn a living wage by 2030. Participating companies must also develop joint action plans with suppliers to extend fair wage practices through their supply chains. Early steps include wage assessments, pilot pay adjustments, and public reporting to drive sector-wide accountability. Over 1,400 businesses, including JA Solar and Adiantes, have joined with measurable, time-bound wage targets.

Understanding and addressing pressures on farmers and suppliers: The Farmer Income Lab, launched by Mars, with Dalberg and Wageningen universities and Oxfam USA, is a collaborative effort to identify ways to increase smallholder farmers’ incomes – beginning with Mars’ supply chains in developing countries – and to understand how to create positive outcomes for farmers at scale.

Focusing on purchasing practices: The Better Buying Institute (recently acquired by Cascale) is an organization that provides tools and research to help companies improve purchasing practices in ways that support fairer, more sustainable supply chains. Better Buying’s anonymous supplier feedback system enables suppliers to confidentially evaluate their customers’ purchasing practices across areas such as planning and forecasting, payment terms, and order changes, which provides structured and candid insights that might not otherwise be shared openly, helping buyers and suppliers to identify where practices may create unnecessary cost pressures or labour rights risks. For example, Under Armour has used these supplier evaluations to address issues such as forecast accuracy, production timelines, and vendor training. SanMar, a large US-based wholesale apparel supplier, has publicly shared its Better Buying scores to demonstrate its commitment to transparency and accountability. The company has also used the supplier feedback to refine its forecasting processes, reduce last-minute order changes, and improve communication with manufacturing partners.

Exploring customer willingness to pay for better practices: In April 2024, as part of its participation in the Tony’s Open Chain initiative, Waitrose introduced a small yellow “Tony’s Open Chain” label on its private-label chocolate bars and raised prices by about 10%, which the company reported having had a positive impact on its sales, at least in the early weeks of its sales. Member brands of the Tony’s Open Chain collaboration— which includes Waitrose, Aldi, and Ben & Jerry’s—commit to paying a living-income premium above Fairtrade prices to bridge income gaps for cocoa farmers. The initiative is reporting early positive outcomes related to reduced child labor rates and reduced deforestation.

Partnering with expert organizations to pilot new approaches: In 2021, Brands Fashion, in partnership with GIZ and Fairtrade, piloted a living wage initiative covering around 1,000 textile workers in India. The project certified the company’s entire supply chain under the Fairtrade Textile Standard, making it the first apparel firm to achieve this. These 1,000 workers were employed in selected certified factories where Brands Fashion had established relationships and sufficient influence to implement wage increases, worker training, and democratic representation.
Recognizing and acting upon the correlation between human rights and overall supplier performance: Research by Business Fights Poverty and Cambridge Institute for Sustainability Leadership, supported by Shift, has highlighted a direct correlation between how a supplier treats their workers and the overall performance of that supplier on a range of factors. Research interviews with buyers identified a clear link between the quality and reliability of suppliers, and the working conditions and levels of pay received by workers in supplier factories. As such, mitigating risks to supply chain workers can help to mitigate other risks associated with supplier performance and create the opportunity for improved business performance. To measure this correlation, the procurement teams of some leading companies now benchmark and track the corporate payback from investments in responsible purchasing practices.

Integrating extreme heat adaptation actions into supplier codes of conduct: Levi’s’ 2025 Supplier Code of Conduct addresses the brand’s expectations for workplace health and safety across its strategic suppliers and has explicit expectations for managing extreme heat, which specify requirements such as the provision of potable water near work areas, shaded or cooled rest zones, and defined work/rest schedules.

Contributing to a regulatory environment that enables respect for rights: In 2014, eight apparel brands wrote to the Cambodian deputy prime minister and the chairman of the local Garment Manufacturers Association to say they were “ready to factor higher wages” into their pricing.

Alternative Models

In the US, the Fair Food Program, established by The Coalition of Immokalee Workers (CIW) in 2011, brings together the CIW, farmworkers on participating farms, farmers and retail food companies. Among the many facets of the program is a “penny per pound” premium that is paid by participating buyers on top of the regular price paid for tomatoes or other covered products. The premium is then passed through by farmers as a bonus on worker’s paychecks, which are monitored by the Fair Food Standards Council, the program’s independent monitoring body. See further from Shift here.

Alternative models can focus on differentiating through quality and/or ethical and transparent sourcing. Various “slow” movements (“slow food,” “slow fashion”) etc. offer products in which the value proposition incorporates fair, transparent and sustainable sourcing and manufacturing, with a focus on durability and quality.

The ETI highlights examples in the apparel industry, including:

Nudie Jeans (higher priced but ethically sourced and more durable jeans)
People Tree (apparel produced using organic cotton, sustainable materials and traditional skills that support rural communities)
“Crowd farming” (consumers receive food directly from source and sponsor the cultivation of raw materials)

ASKET is a Swedish menswear company that operates on the premise of a permanent, season-less collection. They focus on producing only “essential” garments that are continually refined, reducing overproduction and quick style turnover. They sell directly to consumers at full cost transparency—detailing origin, factory working conditions, and itemized pricing—with the aim of shifting focus from cheap volume to long-term value. ASKET generates around $10 million in annual sales by relying on a transparent, durable-focused business model that also emphasizes repair and resale programs to support a full lifecycle approach and to differentiate from a low-cost, disposable fashion model.

Tony’s Chocolonely prioritizes ethical sourcing, fair labor practices, and long-term sustainability over price minimization. The company implements five core sourcing principles: 100% traceable beans, paying higher prices to farmers, empowering farmers to have greater control and bargaining power in the supply chain, establishing long-term purchase agreements, and supporting improvements in bean quality and productivity. The company also introduced a feature it refers to as “Mission Lock,” which is a legal structure focused on maintaining the company’s ethical mission, preventing any changes to its core values and sourcing principles.

Other tools and resources

Shift (2025) Living Wage Accounting Model and Progress Tool
Cascale’s Better Buying programme
Business and Human Rights Resource Centre (2025) The missing thread: Workers absent from fashion companies’ climate plans
Fashion Revolution (2024) What Fuels Fashion?
Global Labor Institute (2023) Higher Ground? Reports 1 & 2.
Ethical Trading Initiative (2024) Extreme heat: Risks for workers in global supply chains
Ethical Trading Initiative (2025) Flooding: Risks for workers in global supply chains
Ethical Trading Initiative (2025) Common Principles for Responsible Purchasing Practices in Manufacturing Industries
Ethical Trading Initiative (2024) Common Principles for Responsible Purchasing Practices in Food
Global Deal (2024) The Global Deal Flagship Report
Reinecke, J., Donaghey, J., Bocken, N. and Lauriano, L. (2019) Business Model and Labour Standards: Making the Connection Ethical Trading Initiative, London
Fair Labor Association (2020) Fair Compensation Strategy
IDH Roadmap on Living Wages: A Platform to Secure Living Wages in Supply Chains

Case example

Rana Plaza Factory Fire (IHRB)

Citation of research papers and other resources does not constitute an endorsement by Shift of their conclusions.

Living Wage Accounting Model and Progress Tool

Ensuring a living wage is one of the most impactful actions a company can take to respect human rights and help tackle social inequality.

Shift, the Capitals Coalition and Forvis Mazars are launching a free downloadable Progress Tool for companies to account for their progress towards implementing living wages. The Progress Tool has been developed to enable standardized, meaningful, and comparable reporting on progress towards living wages made by companies in their workforce and first tier supply chain.

Download the Progress Tool

Companies can enter wage data, use whichever recognized living wage estimate they prefer, and receive clear metrics that can be disaggregated to facility, region or country level or aggregated globally. The results can be used to track progress over time and identify hotspots requiring priority attention.

About the Progress Tool

The Progress Tool provides the most accurate insights when companies can input actual wage data, as they are able to do for their own employees. Companies that have signed up to UN Global Compact’s Living Wage Target to achieve 100% of employees earning a living wage by 2030 can use the Progress Tool to meet their reporting obligations.

Two additional versions of the Progress Tool will enable companies to measure living wage progress where they do not have access to full wage data, for example for first tier supply chain workers. These will be available by mid-2025.

By using the Progress Tool, companies can understand for themselves, and demonstrate publicly, the extent to which they are helping the lowest-paid workers that contribute to their financial success achieve a living wage. Furthermore, it supports companies to meet the growing demands of investors, due diligence legislation and reporting standards.

The three-year project to develop the Living Wage Accounting Model, on which the Progress Tool is based, involved extensive consultation with, and learning from companies, investors, standard-setters, living wage initiatives and accounting experts.

Generous funding from Porticus and the Tipping Point Fund have made the project and development of the Progress Tool possible.

Background

Efforts to tackle growing levels of inequality and poverty around the world are increasingly focused on the payment of a living wage. That’s because realizing the human right to a living wage is essential to raising the living standards of the most vulnerable workers and their families – and to fulfilling a range of other human rights, including rights to food, water, health, adequate housing, education, family life, and fair working hours.

The wider impact on society is also clear. Studies have shown that reductions in poverty and inequality can lead to greater social cohesion, as well as benefits to business. Paying a living wage can deliver not only a more motivated and productive workforce, with lower staff turnover, but also improved revenues and profits and increased value chain resilience and performance.

Until now, there has not been a generally agreed, straightforward and measurable way for companies to reflect their work to achieve living wages in their public reporting. As a result, investors, civil society and other interested stakeholders have not been able to access the information they need to compare companies’ progress, assess which are contributing to the solution and push those sitting on the sidelines to play their part.

“To get more companies to walk the talk on paying a living wage, we need to define what success looks like, and how to measure progress along the way. And we need common metrics for companies to account for that change in their public reports. Only then can markets reward those companies that are part of the solution to today’s growing inequalities, and push others to play their part.”

Caroline Rees President of Shift

The Accounting for a Living Wage project created a model that helps paint a picture of the scale and scope of the living wage deficits experienced by workers, as well as progress towards living wages over time. Having a shared and simple methodology to track and report on progress has proven key to the success of similar efforts to embed sustainability goals in business decision-making.

The Living Wage Accounting Model can be used to:

Deliver greater transparency regarding the payment of Living Wages
Inform new standards around Living Wages
Create incentives for improving wages and reducing inequalities.

It has been designed to support the work of:

Investors and CSOs – who can use the information disclosed by companies to make assessments and incentivize better performance

Businesses – who can use the model and Progress Tool to measure and disclose their progress on living wages in a standardized way

Standard setters – who can embed the model in their standards to ensure that companies provide valuable, comparable information

Download the Progress Tool

PROGRESS TOOL DEVELOPED WITH

The Living Wage Accounting Model

3 resources

September 2023

A Model to Measure Progress on Living Wages

The background to the project and the rationale for developing a model to measure progress on living wages.

GOVERNANCE – High-level oversight of policy/strategy/transition planning – Human Rights Due Diligence process linked to transition planning and implementation – Approval of targets	STRATEGY – Just transition commitment – Decent jobs commitment – Social dialogue commitment – Identification of and meaningful engagement with affected stakeholders – Workforce composition
RISK AND IMPACT MANAGEMENT – Highest risk climate actions and locations – Measures taken to mitigate risks – Process for identifying and addressing skills gaps and opportunities	METRICS & TARGETS (this is our focus) – Job security Reskilling, upskilling and redeployment – Remuneration & living wage – Engagement with workers and communities

RED FLAG # 4

The business’s commercial success substantially depends upon offering privatized access to public goods and services, such as water, health, security and housing, where profit-maximization affectsaccess or quality

For Example

Higher-Risk Sectors

Questions for leaders

Understanding Risks and Opportunities

Risks to People

Risks to the Business

What the UN Guiding Principles Say

Possible Contributions to the SDGs

Taking Action

Due Diligence Lines of Inquiry

Mitigation Examples

Alternate Models

Other Tools and Resources

RED FLAG # 3

The business’s commercial success substantially depends upon construction or commencement of projects with timelines that do not allow sufficient time for consultation with groups affected by the projects.

For Example

Higher-Risk Sectors

Questions for Leaders

Understanding Risks and Opportunities

Risks to People

Risks to the Business

What the UN Guiding Principles say

Possible Contributions to the SDGs

Taking Action

Due Diligence Lines of Inquiry

Mitigation Examples

Alternative Models

Other Tools and Resources

RED FLAG # 1

The business’s commercial success substantially depends upon offering lowest cost goods or services such that it becomes economically challenging for the company or suppliers to respect labor rights.

FOR EXAMPLE

HIGHER-RISK SECTORS

Questions for Leaders

Buyers

Suppliers

Understanding Risks and Opportunities

Risks to People

Risk to the Business

What the UN Guiding Principles Say

Possible contributions to the Sustainable Development Goals (SDGs)

Taking Action

Due Diligence Lines of Inquiry

Mitigation Examples

Alternative Models

Other tools and resources

Ensuring a living wage is one of the most impactful actions a company can take to respect human rights and help tackle social inequality.

Background

The Living Wage Accounting Model

A Model to Measure Progress on Living Wages

Using the Living Wage Accounting Model

Contextual Indicators

About the European Commission’s Omnibus Simplification Proposal on EU Sustainability Due Diligence and Reporting Laws

About the EU Corporate Sustainability Due Diligence Directive

How should companies respond to the current regulatory uncertainty?

Core Resources

Our analysis

Frequently Asked Questions about the EU Corporate Sustainability Due Diligence Directive

Aligning the EU Due Diligence Directive with the International Standards: Key Issues in the Negotiations

Designing an EU Due Diligence Duty that Delivers Better Outcomes

Shift’s Analysis of the EU Commission’s Proposal for a Corporate Sustainability Due Diligence Directive

“Signals of Seriousness” for Human Rights Due Diligence

Previous Comments and Analysis by Shift

Guardrails

A series of guardrails for designing better social indicators and metrics.

Guardrail 01: Avoid indicators that create perverse behavioral consequences.

Guardrail 02: Avoid indicators that encourage unjustified conclusions.

Guardrail 03: Avoid indicators that offer insight into a company’s intentions but no insight into whether these are followed through in practice.

Guidelines

A series of guidelines for designing better social indicators and metrics.

Introduction to Guideline 01: Use indicators that are strong predictors of business decision making and behavior.

Guideline 1: Use indicators that are strong predictors of business decision making and behavior.

Guideline 1: Use indicators that are strong predictors of business decision making and behavior.

Guideline 1: Use indicators that are strong predictors of business decision making and behavior.

Guideline 2: Use indicators that offer insight into the quality of a company’s due diligence.

Guideline 3: Use indicators that offer insight into a company’s contribution to positive outcomes for people.

Advancing the S in ESG

Barriers to strengthening the S in ESG

Guardrails and guidelines for indicator design

The business’s commercial success substantially depends upon offering privatized access to public goods and services, such as water, health, security and housing, where profit-maximization affects
access or quality