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.
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
The metrics, basic and expanded disclosures and accompanying statements of methodology that companies can follow to measure and report their progress on living wages.
A set of additional disclosures that draw on existing indicators related to living wages. When used in conjunction with the Accounting Model, these disclosures provide companies with a comprehensive Living Wage Reporting Framework that follows the ISSB four-part framework of Governance, Strategy, Risk Management and Targets and Metrics.
Action to address climate change is urgent and essential for our shared future.
This action should shape better lives for all, not leave the poorest and most marginalized left out and worse off. We already see the consequences of today’s high levels of inequality all around us in social polarization, political backlash, economic protectionism and instability. Climate action that fuels these dynamics will only increase opposition to the kinds of changes we need to make to build a more sustainable future. Instead, we need to achieve what is termed a ‘just transition’ – a transition to a low carbon and climate-resilient future that minimizes harm to vulnerable workers, communities and consumers.
Companies, standard setters and financial institutions increasingly recognize the need to bring a human rights perspective to climate action in service of a just transition. And standard-setters are already reflecting these expectations in the laws, regulations and other standards they develop. We see more and more organizations using narrative – or ‘qualitative’ – indicators to describe how human rights considerations are integrated into companies’ efforts to mitigate and adapt to climate change. However, descriptions alone will not enable companies and others to know just how successful these efforts are in practice. We are missing the quantitative metrics that are also needed to measure what is working and what isn’t, to know which are the successful approaches that should be scaled and replicated, and to be able to account for the results.
Shift has been exploring the opportunity to build broad consensus around a core set of quantitative, sector-agnostic metrics that can supplement qualitative indicators and help provide the full picture necessary to assess the ‘justness’ of the climate transition.
We aim to keep this a simple set of sector-agnostic metrics that does not – because it cannot – address all issues and variations. We hope that they can then be built on further in the future to meet the specific circumstances and needs of different sectors, with their differing roles in achieving a just transition, and the differing local contexts in which they operate.
We will also need to keep these initial metrics within the realm of data that can reasonably be gathered and provided by companies, while recognizing – and hoping – that the art of the possible will improve over time. They should be capable of being applied in the context of full ‘transition plans’ or in relation to more diffuse activities targeted at the transition. In either case, the metrics would apply within the same ‘boundaries’ – in terms of facilities, locations or other fields of action – as those plans and activities and their associated climate metrics.
The final set of just transition metrics should be one that can be embedded in sustainability reporting standards alongside important contextual information.
Figure 1 demonstrates how they might fit into the four-pillar structure that is common to many reporting standards today.
Figure 1
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
We are sharing here an early draft – a work in progress – of a potential set of such metrics. They build on our experience working with the Global Reporting Initiative, which has made ground-breaking progress on just transition metrics as part of its 2025 revision of its Climate Change reporting standard. They also reflect inputs and suggestions from various organizations and ‘just transition’ experts. We are grateful to all those who have provided their insights to date.
We plan to continue and expand these conversations in the months ahead, as we know there is much that remains to be improved. Achieving a broad consensus around the current best-in-class metrics should bring clarity and value to all stakeholders: companies themselves as they try to measure what matters; data providers and investors who need this information for their own services and decisions; and reporting standard-setters needing to ensure consistency for preparers and insight for users of disclosed information.
We look forward to engaging with organizations interested in providing expertise and feedback to this effort, including organizations from the Global South. We welcome all inputs and advice as part of this continuing collaboration.
About the European Commission’s Omnibus Simplification Proposal on EU Sustainability Due Diligence and Reporting Laws
In 2024, the President of the European Commission announced that the Commission would bring forward a proposal to simplify requirements and reduce burdens on smaller companies, including in connection with the recently adopted Corporate Sustainability Due Diligence Directive (CSDDD) and the more established Corporate Sustainability Reporting Directive (CSRD). In February 2025, the Commission announced its ‘Omnibus Simplification Proposal’. While the goals are reasonable ones for European Union (EU) policy-makers to pursue, in factthe proposal risks making life more complicated for both large and small companies.
You can read Shift’s initial assessment of the Omnibus Proposal here. In it, we explain how the proposal would make it much harder for companies to ‘know and show’ that they are managing the human rights and environmental risks they face, and leave them on the back foot when they are ‘named and shamed’ by the media and NGOs when things go wrong in their supply chains.
Shift will continue to be actively involved in the Omnibus legislative process based on our mission to advance alignment of influential standards with the UN Guiding Principles on Business and Human Rights. We will regularly share resources and updates here, so please check back in or sign up to our newsletter here.
About the EU Corporate Sustainability Due Diligence Directive
Beginning in 2017, several European states including France, Germany and the Netherlands began to adopt versions of human rights due diligence legislation. This created momentum for the EU to help level the playing field.
In 2022, the EU began negotiating a draft Corporate Sustainability Due Diligence Directive (CSDDD) which was finally adopted in May 2024. During this time, Shift’s focus was on ensuring the CSDDD was anchored in the international standards on sustainability due diligence – the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. Despite limitations with regard to the scope of companies covered under the Directive, and limited obligations with regard to due diligence on downstream impacts, the core content of the final law was substantially aligned with the UNGPs – making it more likely to be both impactful for people and planet and manageable for companies to implement. The Directive provides that EU Member States have two years to transpose it into their national laws. Enforcement would then commence one year later for the first batch of covered companies, with the others following after. The Directive was expected to cover more than 5500 companies. For more information, check out Shift’s responses to Frequently Asked Questions about the CS3D.
How should companies respond to the current regulatory uncertainty?
Given the uncertainties created by the Omnibus Proposal and negotiation process, our advice to companies that want to know how they should respond is simple – keep doing risk-based due diligence in line with the existing international standards. That remains the single best investment companies can make to prepare to meet current and future demands, whether from investors, lenders, customers, civil society or EU policy-makers as this process moves forwards.
Core Resources
Our analysis
5 resources
April 2024
Frequently Asked Questions about the EU Corporate Sustainability Due Diligence Directive
In this resource, Rachel Davis (Co-Founder), and Ruben Zandvliet (Deputy Director for Standards), answer companies’ frequently asked questions about the new Corporate Sustainability Due Diligence Directive. Since the approval of the Corporate Sustainability Due Diligence Directive (CS3D) by senior officials from EU Member States in Council on 15 March, we’ve received numerous questions from companies […]
Aligning the EU Due Diligence Directive with the International Standards: Key Issues in the Negotiations
Aligning the CS3D with the core concepts in the international standards The EU is currently in the process of negotiating a legal instrument that will establish new corporate human rights and environmental due diligence duties across the single market – the draft Corporate Sustainability Due Diligence Directive (CS3D). At the heart of the negotiations is […]
Designing an EU Due Diligence Duty that Delivers Better Outcomes
What is the CS3D? Starting in 2022, the European Union has been negotiating a draft Directive on Corporate Sustainability Due Diligence (CS3D), with discussions on a final law expected to begin by mid-2023. The draft Directive aims to ensure companies active in the single European market contribute to sustainable development by preventing and addressing negative human rights and environmental impacts. […]
Shift’s Analysis of the EU Commission’s Proposal for a Corporate Sustainability Due Diligence Directive
On 23 February 2022, the European Commission released its ‘Proposal for a Directive of the European Parliament and of the Council on Corporate Sustainability Due Diligence. Its overall objective is to ensure that companies active in the internal market contribute to sustainable development …through the identification, prevention and mitigation, bringing to an end and minimization […]
“Signals of Seriousness” for Human Rights Due Diligence
This discussion draft is intended for the consideration of the European Commission and other stakeholders as the Commission develops proposals on mandatory human rights and environmental due diligence (mHREDD) and considers how national regulators would implement any such legislation. Shift is submitting this draft together with our formal response to DG JUST’s consultation on a […]
Rachel Davis’ March 2022 COMMENTS to the European Parliament RBC Working Group on the release of the Commission’s proposal
Our March 2022 ANALYSIS of the Commission’s proposal for a draft Directive
Our October 2021 Key Design Considerations for the Enforcement of Mandatory Due Diligence, developed in collaboration with the Office of the UN High Commissioner for Human Rights
This publication draws on Shift’s involvement in drafting the European Sustainability Reporting Standards, our expertise in the UNGPs, and our advisory work and research on banks’ approach to double materiality assessments (DMA). Although this publication refers to banks, the content also applies to other financial institutions who are likely to be connected to severe impacts via their portfolio companies, such as asset managers, asset owners and insurance companies.
Financial institutions and other companies are currently preparing their first reports under the EU’s Corporate Sustainability Reporting Directive (CSRD), based on the European Sustainability Reporting Standards (ESRS). Many banks, however, appear to be incorrectly interpreting and applying the requirements in the ESRS on impact materiality. These misinterpretations would severely undermine the double materiality assessment (DMA), which is the cornerstone of sustainability reporting. The result of flawed DMAs is that banks will fail to report on material human rights impacts that they are involved with via their client relationships.
This resource offers urgent clarifying guidance for banks to ensure that their Double Materiality Assessments adequately meet EU reporting requirements by leveraging the underlying international standards on corporate respect for human rights (the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines).
This Business and Human Rights Primerfor Government Mission Personnel is for all Government mission personnel – from diplomats to embassy, mission, and agency staff – whatever their responsibilities, and wherever they work.
The primer provides an overview of business and human rights and the UN Guiding Principles on Business and Human Rights. Crucially, it includes practical resources to help mission personnel meaningfully engage with the business and human rights issues that arise in the field.
The primer is designed to equip government mission personnel to communicate clear expectations that can help advance business respect for human rights.
This series captures the research findings from our analysis of almost 1300 social and governance indicators used in ESG data providers’ products or reporting requirements.[1] In our Guardrails, we’ll focus first on the problems, spotlighting the types of indicators that offer minimal insight, or worse, incentivize poor practices. We’ll then turn to indicators and metrics that are more robust in our Guidelines, illuminating the pathway to better measurement.
Guardrails
A series of guardrails for designing better social indicators and metrics.
3 resources
May 2024
Guardrail 01: Avoid indicators that create perverse behavioral consequences.
Across the series, we will exemplify the good, bad and ugly of social indicators and metrics. Our research looked at indicators focused on specific issues like forced labor or indigenous rights or living wages, and on evaluations of companies’ governance, risk management processes, responsible supply chain initiatives, and stakeholder engagement. Our goal is not to offer yet another set of competing indicators, but to share what we’ve learned about good indicator design in order to inform healthy debate, collaboration and innovation to improve the S in ESG.
The series is for everyone and anyone working to improve the ways in which we evaluate companies’ social performance.
Advancing the S in ESG
The field of sustainability and responsible business conduct is faced with a significant opportunity: to coalesce around a core set of select, standardized indicators and metrics that meaningfully measure companies’ social performance regardless of their industry sector. This is key to equipping investors, business leaders, regulators and civil society with the tools to push to scale business practices that are in line with the principle of basic dignity and equality for all.
Success will significantly contribute to tackling inequalities, ensuring business actions towards net zero and net positive have the social license to proceed at the urgent pace required, and adapting business models and global value chains so that they deliver resilience to businesses and the stakeholders they impact. Failure risks ushering in more, already well-catalogued business-related harms and risks to people, planet and prosperity, likely with evermore multi-generational consequences.
The good news is that most stakeholders have embraced the pressing need for convergence around corporate sustainability reporting standards, including the indicators and metrics against which companies should disclose information and that should be used to evaluate corporate performance. Even better, recent institutional coordination and collaboration has set the stage for well-governed and inclusive processes needed to achieve such convergence.
Barriers to strengthening the S in ESG
Any ambitious project has risks that need managing. The challenge of building consensus across diverse stakeholders around indicators and metrics that offer credible insight into a company’s social performance is no exception.
Some risks are the consequence of positive dynamics. For example, the welcome growing attention to the S in ESG has resulted in thousands of social indicators and metrics already being developed by mainstream data providers and more targeted ranking and rankings. But the risks is that in a bid to identify a smaller set of indicators, we select the most commonly used indicators, in spite of broad recognition that these may not be fit for purpose.
In addition, the urgent need to effect a step change in the scale and quality of corporate reporting and assessment on social issues also carries the risk that project timelines prevent us from interrogating the devil in the detail of indicator formulations, such as when indicators may have perverse, unintended consequences.
The consequence of such risks is more than inconvenience and frustration. We could end up with solutions that confuse decision-makers, reflect the lowest common denominator of thinking and practice, or fail to ward off critiques of blue-washing and corporate capture, but also of so-called woke capitalism.
Guardrails and guidelines for indicator design
In climbing, guidelines are cords or ropes to aid passers over a difficult point or to permit retracing a course. Guardrails are physical barriers used to prevent people from falling from a height or from straying from a pathway or road into dangerous areas. So, both are put in place when the journey and terrain may be hard to navigate.
In the context of designing social indicators and metrics, we need both guardrails and guidelines, so we’ve structured our initial findings within the series around these.
If we fail to reclaim the measurement of companies’ social performance as a tool to advance business respect for human rights, the S in ESG will remain divorced from the investor and business decisions that determine whether business is done with respect for people’s dignity. We hope this series can play a part in sustaining, advancing and scaling practices that lead to better outcomes for workers, communities and the people impacted by the use of products and services.
[1] Shift was unable to verify whether the non-public indicators and metrics that we used for our analysis are the most up to date versions used by data providers at the time of writing (April 2024). We also recognize that the underlying methodologies used to reach a judgement on a company’s performance against an indicator may offer more nuance that we could not access for our research.
In this resource, Rachel Davis (Co-Founder), and Ruben Zandvliet (Deputy Director for Standards), answer companies’ frequently asked questions about the new Corporate Sustainability Due Diligence Directive.
Since the approval of the Corporate Sustainability Due Diligence Directive (CS3D) by senior officials from EU Member States in Council on 15 March, we’ve received numerous questions from companies about where it’s landed and what it means for businesses’ responsibility to respect human rights. With the legislation now weeks away from the finish line, we thought it was a good time to help clear up some of the confusion we’ve been hearing.
This is the first in a series of free, publicly available resources where we’ll be unpacking a few of the common questions – and misconceptions – about the Directive and its relationship with the international due diligence standards, just as we have done for the Corporate Sustainability Reporting Directive. This includes:
What is Human Rights Due Diligence and where does it come from?
Is the CS3D some new kind of ‘European due diligence’?
Is the CS3D aligned with the international due diligence standards on business and human rights?
What is the role of administrative supervision in the enforcement of the CS3D?
What does civil liability in the CS3D apply to? What does this mean for companies?
What about Member States – what are they required to do?
As a company, what can I do now?
What about impacts in downstream business relationships – are these still covered by legislation?
Whether these are your first steps as a company on the sustainability due diligence road, or you’re well on your way, we hope these resources will help you take the CS3D confidently in your stride.
As a non-profit organization, Shift has been committed to advancing business respect for human rights from the get-go – first in our role helping to draft the UN Guiding Principles on Business and Human Rights (UNGPs), and in the decade since their adoption, embedding them into business practice with companies, financial institutions, civil society organizations and standard-setters around the world.
In June 2023, following concern from member banks over the persistent scourge of child labor in global value chains and recent reports of the alarming increase in child labor – particularly migrant child labor – in the United States, Shift held a peer-learning session of its Financial Institutions Practitioners Circle on the topic. The session explored how banks and financial institutions can strengthen their efforts to respect children’s rights, particularly in the context of child labor. As a report by UNICEF, Save the Children and the UN Global Compact noted, children are still too often invisible in ESG reporting; and the financial sector can play an important role in changing this.
This resource is a joint publication by Shift, The Centre for Child Rights and Business and UNICEF. It captures some of the key take-aways from this session, and draws on the experience of the three organizations working with real-economy companies and financial institutions.
In 2016, ESG investing amounted to US$ 22.8 trillion of global assets – by 2025 it’s expected to reach US$ 53 trillion.[1] Yet, while lenders and investors are increasingly using Environmental, Social and Governance (ESG) indicators in their decision-making processes, confusion about metrics persists, particularly when it comes to the ‘S’ in ESG. So, it’s vital that these approaches align with the UN Guiding Principles on Business and Human Rights, which leading financial institutions, states and businesses have been working to implement for over a decade.
In June 2024, the United Nations Working Group on Business and Human Rights will present a report to the UN Human Rights Council on the approaches to ESG taken by financial institutions, including investors, in recognition of their “unparalleled ability to influence companies and scale up on the implementation of the Guiding Principles”.[2] The report will provide guidance for governments, financial actors and others, on aligning ESG approaches with the UN Guiding Principles. As part of this, the group put out a call for input from a variety of stakeholders to inform their recommendations.
This response is Shift’s submission to the consultation, which builds on a decade of experience working with a range of financial actors, including investors, to drive successful implementation of the UN Guiding Principles on Business and Human Rights. For over 10 years, we’ve been supporting financial institutions to identify, assess, and manage the adverse impacts on people associated with their financing activities. In that time, the landscape has changed significantly – marked by new regulatory incentives, increased data availability, and a growing appreciation of the value of robust due diligence processes to financial institutions.
Aligning the CS3D with the core concepts in the international standards
The EU is currently in the process of negotiating a legal instrument that will establish new corporate human rights and environmental due diligence duties across the single market – the draft Corporate Sustainability Due Diligence Directive (CS3D). At the heart of the negotiations is how to ensure the CS3D is meaningful in driving better human rights and environmental outcomes while also being manageable for companies.
This crucial phase of negotiations is a vital opportunity to align the CS3D with the core concepts in the international standards. The international standards on sustainability due diligence – the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises (OECD Guidelines) – help answer precisely that question, so it’s not surprising that the negotiators’ positions have increasingly built on the core concepts in these standards. Not only have they been shown to work in practice – diverging from them in the CS3D would risk creating a fragmented and confused approach, especially for the many companies that have already been working to implement them.
In this report, Shift takes stock of where progress has been made – and where work still remains – to ensure greater alignment between the positions of the three EU political institutions – the Commission, Council and Parliament – and the international due diligence standards.
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