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• Reputational risks: Individual company climate change impacts that affect human rights can generate considerable attention and multinational corporations are often targeted for criticism, particularly where people believe that appealing to governments may have little effect.

  • Even where legal action against a company relating to the human rights impacts of climate action or lack of action is unsuccessful, this can still present considerable reputational risk to the company.

  • Non-judicial proceedings can create reputational risks. Examples include communications by UN experts on the responsibilities of the financial backers of Saudi Aramco under the UN Guiding Principles on Business and Human Rights, and a complaint with the American National Contact Point against insurance broker Marsh challenging the East African Crude Oil Pipeline planned by TotalEnergies in Uganda.

  • In 2022, the UN Commission on Human Rights (CHR) of the Philippines published its final report finding that the world’s biggest polluting companies can be held responsible for human rights violations and threats arising from climate impacts. CHR announced that the 47 investor-owned corporations, including Shell, ExxonMobil, Chevron, BP, Repsol, Sasol, and Total, could be found legally and morally liable for human rights harms to Filipinos resulting from climate change.

  • In 2025, the UK charity ActionAid publicly cut ties with HSBC, citing the bank’s continued financing of fossil fuel and industrial agriculture projects—amounting to over £153 billion between 2021 and 2023—as evidence the company is consistently “choosing profit over people and planet”. Civil society groups like BankTrack, Indigenous rights advocates, and major investor coalitions such as ShareAction have raised similar concerns about HSBC’s increasing financial, legal, and reputational risks tied to climate change.

• Legal, financial and regulatory risks: Companies that do not take action to address their climate change impacts can face legal action for their contribution or preemptive legal action to avoid company activities that are perceived to negatively impact local communities or other stakeholders. Since 2016, there has been significant growth in climate change-related legislation. As of July 2025, 2967 climate change cases have been filed globally. Around 20% of climate cases filed in 2024 targeted companies, or their directors and officers. According to the London School of Economics’ Grantham Institute, which analyzes climate change litigation annually, “The range of targets of corporate strategic litigation continues to expand, including new cases against professional services firms for facilitated emissions, and the agricultural sector for climate disinformation”. While highly anticipated legal decisions have faced evidentiary hurdles, they have: (a) acknowledged the connection between GHG emissions, physical climate change and impacts on people, (b) scrutinized whether companies are taking reasonable and sufficient action to mitigate their impacts, and (c) explored the principle of companies being held liable for climate-related harm. Some notable legal developments include:

  • Litigants have had high profile successes in international courts and tribunals, including at the International Court of Justice and European Court of Human Rights, as well as advisory opinions form the International Tribunal for the Law of the Sea and the Inter-American Court of Human Rights. The decisions and opinions emerging from these international bodies, which broadly affirm the right to a healthy environment, including a stable climate, provide important points of reference for litigation more broadly.

  • Royal Dutch Shell was taken to court in 2019 in the Netherlands on human rights grounds relating to the climate impact of its business. Although Shell won an appeal of the case brought by Milieudefensie in 2024, the court emphasised that companies, especially those that have contributed to climate change, have a responsibility and power to contribute to combating climate change. Further, the court affirmed in unequivocal terms that “protection from dangerous climate change is a human right” and these rights extend to what can be required of Shell.

  • A Peruvian farmer filed a lawsuit against German Energy giant RWE in German courts. His case argued that because RWE’s GHG emissions—estimated at 0.5% of historical global emissions—contributed significantly to glacial melting and heightened flood risk that impacted his property in Huaraz, Peru, RWE should compensate him for 0.5% of the costs of his flood protection investments. While the case was ultimately dismissed, after multiple appeals and years of litigation, for the first time, a court affirmed that large emitters could be held civilly liable under German law for climate damage—even across borders—based on scientific attribution and proportionate responsibility.

  • In September 2015, typhoon survivors and civil society groups in the Philippines, supported by Greenpeace and NGOs, filed a first‑of‑its‑kind petition with the Philippine Commission on Human Rights (PCHR), calling for a formal inquiry into whether 47 major corporate emitters (including Shell, ExxonMobil, Chevron, BP, Repsol, Sasol and Total) violated Filipinos’ rights by fueling climate change. The PCHR officially accepted the complaint in December 2015, held hearings from 2016 to 2018, and gathered extensive scientific data, testimonials, and expert briefs. In May 2022, the PCHR released its National Inquiry on Climate Change report, which concluded that the companies engaged in “wilful obfuscation” of climate science and that their actions were both morally and legally liable for human rights harms to Filipinos resulting from climate change.

  • In May 2024, Vermont became the first U.S. state to pass a “climate superfund” law aimed at holding major fossil fuel companies financially accountable for the costs of climate change. The law targets companies responsible for over one billion metric tons of GHG emissions and seeks to recover the state’s climate-related costs—including infrastructure damage, public health impacts, and other social harms—dating back to 1995. The move has inspired similar legislative efforts in states like New York, Maryland, and California. As of mid-2025, Vermont is still in the implementation phase, developing a damages assessment, while facing a legal challenge from the fossil fuel industry aiming to block the law before enforcement begins.

• Regulatory risks: Regulators globally are increasingly holding high-emitting companies accountable for both climate and human rights impacts. Governments are implementing carbon pricing mechanisms and stricter emissions standards, which increase operational costs for high emitting industries. Further, the EU’s Corporate Sustainability Due Diligence Directive requires large firms to identify and mitigate adverse environmental and human rights impacts across their value chains and expects companies to transition their operations and value chains to a net zero economy in a rights-respecting way. (Note: As of publication, the existing text has been suspended pending a renewed legislative process that is expected to introduce some revisions.)
• Financial risks: Financial institutions are increasingly concerned about the longer-term, climate-linked financial stability of their portfolios, with investors increasingly favoring companies with robust climate strategies, potentially leading to reduced capital access for firms that fail to evolve their business models or do so at too slow a pace. Climate-related shareholder activism has increased dramatically in recent years.
• Business continuity risks: Companies that fail to address their contribution to climate change contribute to systemic risks with material, economy-wide implications for business continuity. For example:
  • operational disruptions from extreme heat and declining worker productivity—estimated to fall 2–3% for every degree Celsius above 20°C, affecting billions of workers worldwide (e.g., in agricultural, construction, and manufacturing sectors).

  • critical process disruptions due to lack of raw materials (e.g., water-intensive manufacturing processes being halted by droughts)

  • supply chain disruptions from climate-related events, which could lead to up to $2.5 trillion in net losses by mid-century

  • increasing insurance premiums, reduced insurance coverage, insurance market volatility or insurance company exits from high risk markets.

Addressing impacts on people associated with this red flag can contribute to a range of SDGs depending on the impact concerned, but the most obvious and notable is:

• SDG 13: Take urgent action to combat climate change and its impacts

• Are we developing or have we published a robust, credible and science-based climate action strategy or transition plan that recognizes and addresses impacts on workers and communities arising from climate action?

• How are we engaging our own workforce, our value chain workers, affected local communities and consumers/end-users in discussions about potential or actual action to address climate change impacts?

• How are we evolving our governance, strategy, risk management and metrics/targets to ensure alignment with the objectives of the Paris agreement? How have we integrated potential impacts on people evolving from that evolution?

• Recognizing both the consequences for the climate and for people’s human rights of GHG emissions:

  • Do we: undertake a robust analysis and disclosure of our contribution to global GHG emissions, including the following?

    • Identifying all our Scope 1, 2 and 3 GHG emissions throughout all our operations, with such identification being science-based, verifiable and informed by input from experts

    • Identifying hotspots across our operations and value chains

    • Disclosing climate-related information through recognized frameworks, such as GRI, CDP, TCFD, ESRS E1, or IFRS S2

  • Do we set ambitious, transparent and verifiable climate-related targets, including:

    • GHG emissions reduction targets across Scopes 1, 2 and 3 emissions

    • Transition-specific alignment targets that directly reflect our company’s progress on critical decarbonization milestones within our sector

• Do we disclose the details of how our capital expenditure plan aligns with our climate action and human rights objectives?

• Have we undertaken scenario analysis to assess resilience of the company’s operations and value chains, as well as the people its operations and value chains may impact, under various warming pathways (e.g., 1.5°C or 4°C)?

• How do we ensure that our public affairs and policy advocacy activities are aligned with the objectives of our climate and human rights actions?

• Do we rely on land-based carbon dioxide removals or the use of carbon credits to meet our GHG emissions reduction targets? If so, do we have mechanisms in place to evaluate the social and environmental integrity of doing so?

• How do we assess whether our climate-related strategies and plans could impact stakeholder groups, namely, our own workers, workers in the value chain, communities and end users, with a particular focus on vulnerable populations?

For companies whose business models substantially rely upon high emitting activities, products or services, examples of integrated, ambitious, organization-wide, and Paris-aligned action is not yet common. However, there are examples of companies that are making important, if partial, strides to address their contribution to climate impacts. For example:

Partial business model transition:

• TransAlta is one of Canada’s largest electricity producers and is in the progress of changing its business model, undergoing a partial low carbon transition away from being a predominantly coal-fired power producer towards natural gas, renewables and energy storage. The company also played an active role in the provincial government’s measures to support workers and communities impacted by the transition.

• Volvo Cars is attempting to transition its business model from producing vehicles dependent on fossil fuels to an electrified vehicle fleet. It originally targeted a fully electric vehicle offering by 2030, but the company updated its target in 2024 to 90–100% electrified sales by 2030. To address human rights-related risks in its value chain resulting from the transition to electric vehicles, particularly around critical minerals for components such as batteries, Volvo is exploring the use of different traceability techniques and “battery passports” that record the origins of raw materials, components, recycled content and carbon footprint of the battery.

Reconceptualizing climate-related target setting:

• Large agrifood companies, such as Danone, Mars, Nestlé and PepsiCo, have acknowledged that, given the realities of the climate challenge within their sector, GHG emissions reduction targets are necessary but not sufficient. These companies have also set no-deforestation commitments for some or all high-risk commodities where deforestation is most prevalent. According to the 2025 Corporate Climate Responsibility Monitor, “these examples demonstrate how transition-specific alignment targets can complement emission reduction targets to guide sector-specific corporate transitions”.

Decision-useful climate disclosures that address the Just Transition:

• Scottish and Southern Energy (SSE) in the UK has publicly disclosed its Just Transition strategy, which considers the impact its transition plan has on people.

• In 2022, Enel was the first company to fully align its corporate climate disclosures with the Climate Action 100+ Net Zero Company Benchmark, which include Just Transition elements.

Collaborative initiatives that use leverage to affect change:

• Climate Action 100+ is an investor-led initiative composed of around 700 investors globally and responsible for over USD 68 trillion in assets under management, which aims to ensure the world’s largest corporate greenhouse gas emitters take action on climate change.

• Orsted, the Danish energy company, was once one of the highest emitting energy companies in Europe, due to its coal-fired power and its oil and gas assets. Since 2009 it has undergone a transition to become a global leader in renewable energy, reducing its GHG emissions by 98% (from 2006 levels, scope 1 & 2 only) and aims to be net zero GHG emissions across its value chain (scope 3) by 2040. The company also continues to use its leverage in support of broader systemic transition, in the context of collaborative initiatives, as well as in advocating for the global elimination of fossil fuel subsidies. While there are concerns about the company’s transition strategy, including its 2017 oil and gas divestment (rather than gradual and actively managed decommissioning), this is one of very few examples of a high emitter’s strategic reorientation, with important lessons for other transitioning or soon-to-be transitioning companies.

• Rivian’s business model distinguishes itself from traditional automakers by focusing exclusively on purpose-built electric vehicles, avoiding reliance on internal combustion engines that drive global greenhouse gas emissions. Its proprietary platform enables efficient production of multiple vehicle models, with efforts to address emissions and social-related risks elsewhere in its value chain. For example, the company is investing in a “supplier park” in close proximity to its Illinois manufacturing facility in order reduce transportation emissions and improve supplier oversight. The company is developing a series of strategic partnerships, including its Amazon electric delivery fleet, to expand market reach.

• Oatly’s business model is built on replacing dairy with oat-based alternatives, which studies show have 62–78% lower greenhouse gas emissions per liter than cow’s milk. This positions the company as a lower-carbon option in the food sector, even if independent reviews caution that some of the carbon benefits are offset by the impacts from product processing, packaging, and sourcing.

• In Australia, where the market for “carbon neutral cattle” is growing, farmers are experimenting with carbon neutral cattle systems focused on soil carbon sequestration to offset greenhouse gas emissions, aiming for net-zero emissions from cattle birth to sale.

• In response to foreign competitive pressures Sweden has developed expertise in niche environmentally friendly steel products and is developing fossil fuel free steel. Such technological innovation is seen as essential to maintaining Swedish competitiveness in the sector.

• Shift (2023) Climate Action and Human Rights: How the UN Guiding Principles can help companies respect human rights when responding to climate change

• Shift (2023) Climate Change & human rights: Avoiding pitfalls for financial institutions

• Frequently asked questions on Human Rights and Climate Change, Fact Sheet No. 38, United Nations Hunan Rights Office of the High Commissioner, 2021

• UN Office of the High Commissioner for Human Rights’ Climate Change Hub

• Amnesty International’s Climate Change Hub

• BSR (2025) Transforming Business Models: A BSR framework to capture the opportunity of business transformation within planetary boundaries

• Germanwatch (2018) Guidance on climate risks and human rights in the insurance sector

• AIM Progress (2025) Bringing people and their rights into corporate climate action

• Human Level (2024) Navigating the Just Transition: Practical Steps for Business Leaders

• UN Working Group on the issue of human rights and transnational corporations and other business enterprises (2023) Information Note on Climate Change and the Guiding Principles on Business and Human Rights provides clear guidance (in section IV) on integrating climate considerations into HRDD.

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

• Reputational Risks:

  • “Over recent years, the tax affairs of major businesses have been subject to unprecedented levels of scrutiny, debate and controversy.” The FT, has noted that despite the “dry, complex nature of corporate tax planning,” campaigners have begun to focus on the issues with “zeal.”

  • In Canada, a Canada Revenue Agency investigation into KPMG’s role in facilitating an offshore tax avoidance scheme to help wealthy individuals avoid taxes, has contributed to ongoing reputational issues for KPMG in Canada, legal challenges, public and professional scrutiny, regulatory penalties and investigations into KPMG’s corporate practices.

• Regulatory Risks: Concerns over the facilitation of base erosion and profit shifting through uneven legislation has led to a multilateral international tax policy initiative under the OECD, resulting in several actions including: a multilateral treaty, the sharing of information between tax administrations, significantly enhanced transparency and exchange of information on tax rulings and annual monitoring and review of harmful tax practices, which has, as of February 2025, resulted in the abolition of 126 tax regimes, with an additional eight in the process of being abolished. International action such as this can be expected to draw regulatory attention across different jurisdictions to aggressive corporate tax practices.

Operational Risks:

• Public outcry over taxation inequality has
  “contributed to significant political instability in many developing countries” which has also been to the detriment of companies operating in these areas. Such outcry has not been limited to developing countries: in the UK several companies have appeared before the Public Accounts Committee or had their high street stores occupied by protestors, and US companies have been the subject of major news investigations.

• Legal, Financial and Operational Risks:

  • In 2024, after several years of legal proceedings, Apple lost its last appeal in the European Court of Justice to avoid paying $14.34 billion (13 billion euro) in back taxes to Ireland, due to “unfair and preferential tax schemes” that it was found to have benefitted from in that jurisdiction.

Taxation policy is a key element in facilitating the achievement of the SDGs. As such, this red flag indicator is relevant for a range of SDGs, including:

• SDG 1: No Poverty, including

  • Target 1.2: By 2030, reduce at least by half the proportion of men, women and children of all ages living in poverty in all its dimensions according to national definitions

• SDG 10: Reduced Inequalities, in particular

  • Target 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality. Income redistribution through taxation can contribute to reducing inequality and promoting inclusive growth.

• SDG 13: Climate Action, in particular

  • Target 13.1: Strengthen resilience and adaptive capacity to climate-related disasters

  • Target 13.4: Implement the UN Framework Convention on Climate Change

• SDG 17: Partnerships for the Goals, in particular

  • Target 17.1: Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection

• Do we have a policy on tax planning that includes a human rights perspective? Do we have a considered and disclosed position on use of “tax havens”?

• How transparent are we about our taxation strategy including as regards our operations in developing countries? Do we disclose how our approach to taxation planning aligns with our business purpose and sustainability strategy?

• To what extent do we review the structures and practices of tax planning through the lens of our responsibility respect human rights, (rather than merely the amount of tax paid, which is an outcome of these practices).

• Are we involved in projects for which tax rules are being created? Is our approach to these negotiations aligned with our sustainability commitments/ responsibilities?

• How meaningful is the interaction between our departments and external advisors responsible for taxation strategy and our corporate responsibility/ sustainability/human rights teams, with a view to internal alignment?

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

• The Fair Tax Mark is a scheme that certifies a business’ tax conduct, including that it “seeks to follow the spirit, as well as the letter of the law, shuns corporate tax avoidance such as the artificial use of tax havens, and is transparent about profits made and taxes paid.”

• In 2024, the Fair Tax Foundation and CSR Europe teamed up to launch the Tax Responsibility and Transparency Index, which is a benchmark that evaluates company tax performance across five areas: policy and strategy; management and governance; stakeholder engagement; transparency and reporting; and contribution and narrative.

• Ørsted was the first Danish multinational to receive the Fair Tax Mark and it is a founding member of the Tax Responsibility & Transparency Index. Økonomisk Ugebrev, a Danish financial publication, also ranked it highly in tax transparency, based on their country-by-country reporting, disclosure on tax havens and governance practices.

• The Extractive Industries Transparency Initiative (EITI) is a coalition of governments, companies and civil society working “to improve openness and accountable management of revenues from natural resources.”

• Allianz states that it “seeks to be a responsible taxpayer…”. The company reports that it does “not engage in aggressive tax planning or artificial structuring that lacks business purpose or economic substance,” does not use tax havens and “refrain[s] from discretionary tax arrangements.” Allianz has a comprehensive “Standard for Tax Management” which requires that tax planning be based on valid business reasons.

• A number of companies are annually publishing country by country tax reports to bring greater transparency to their tax activities, including Unilever, BHP and Maersk.

• In addition to an annual country by country tax report, Danone opines on how its tax practices align with its broader sustainability objectives and discloses its activities in particular jurisdictions that may be perceived as tax havens.

• In 2012 Starbucks announced that following “loud and clear” messages from customers, the company would make “changes which will result in Starbucks paying higher corporation tax in the UK – above what is currently required by law”.

• The 1% for the Planet initiative applies a 1% tax on annual corporate sales, which members commit to donating to grassroots environmental organizations.

• The Global Green New Deal, which is a declaration signed onto by 300 politicians across 44 jurisdictions, calls for several actions including working together to regulate illicit financial flows, stop capital flight, end tax havens and ensure that world’s biggest corporations and wealthiest people pay their fair share of tax.

• The B Team’s Responsible Tax Principles were developed through dialogue with a group of leading companies, convened by The B Team with contributions from civil society, institutional investors and international institution representatives.

• The Center for Economic and Social Rights has developed a set of Principles for Human Rights in Fiscal Policy, which are derived from international human rights law, including soft law.

• Tax Justice Network is a UK-based international research and advocacy network focusing on the link between taxation and, inter alia, human rights. It publishes the Corporate Tax Haven Index and has published deep dives into the links between climate justice and tax justice, including specific sectoral analysis for shipping and extractive sectors.

• The Tax Responsibility and Transparency Index enables multinational businesses to benchmark themselves against high-bar civil society frameworks, pending legislation and pioneering companies in five key areas of tax conduct.

• The International Bar Association’s Human Rights Institute released a 2013 report entitled Tax Abuses, Poverty and Human Rights. The Report addresses tax abuses from the novel perspective of human rights law and policy. It is based on extensive consultation from diverse perspectives and offers insight into the links between tax abuses, poverty and human rights.

• The Business and Human Rights Resource Centre portal on Tax Avoidance.

• Oxfam (2017) Making Tax Vanish: How the practices of consumer goods MNC RB show that the international tax system is broken. Contains an in-depth analysis and critique of the taxation planning practices of one company as well as the company’s response.

• M Lazala, Business & Human Rights Resource Centre (2015) Tax avoidance: the missing link in business & human rights?

• The OECD’s Tax portal includes its Action Plan on Base Erosion and Profit Shifting and Inclusive Framework.

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

Where companies operate in or source responsibly from non-home markets, they can be a catalyst for growth and prosperity. However, where the business model is substantially dependent on gaps in legal frameworks that may not exist in their home market, the company can be seen to be exploiting these governance gaps at this risk of impacts on people:

“The root cause of the business and human rights predicament today lies in the governance gaps created by globalization -between the scope and impact of economic forces and actors, and the capacity of societies to manage their adverse consequences. These governance gaps provide the permissive environment for wrongful acts by companies …”
— Protect, Respect and Remedy: A Framework for Business and Human Rights, UN Doc A/HRC/8/5 (7 April 2008)

Companies exploiting such gaps may engage in:

• Practices associated with maintaining this business model feature risk perpetuating a “race to the bottom,” as countries compete with lower regulatory standards to attract corporate investment.

  • This may manifest, for example, with the siting and re-siting of operations or sourcing in locations with no or low minimum wages or inadequate labor or environmental protections, affecting peoples’ right to health, right to a family life, right not to be subjected to forced labor and numerous other impacts. The impact on individuals working for suppliers of foreign brands in geographies where legal protections are weaker has been well documented, including for examples in this study of Female Migrant Workers in Bangalore’s Garment Industry. Other examples include siting call centres in jurisdictions with underdeveloped overtime laws and worker protections; sourcing electronics from jurisdictions with weaker migrant workers protections or collective bargaining protections; or moving factories over borders where there is weak enforcement of labor standards.

  • In its 2015 report, Human Rights Watch documented how Cambodia’s rise as a garment manufacturing hub was enabled by low wages and favorable trade conditions, but sustained in part through systemic labor rights abuses. The report discusses widespread use of short-term contracts to discourage organizing, failure to enforce labor laws, suppression of independent unions, and impunity for abusive practices—all of which helped maintain Cambodia’s competitive position in global supply chains, attracting foreign business.

• Lobbying against measures or laws that protect people from human rights impacts, for example lobbying against:

  • (increased) minimum wage laws, affecting among other things, the right to just and favorable conditions of work, including decent remuneration;

  • Indigenous title to land affecting ­­Indigenous Peoples’ rights;

  • restrictions on emissions into land, sea and air, affecting the right to an adequate standard of living and to a clean, healthy and sustainable environment;

  • laws that support informed choice or plain packaging/non-marketing of harmful products such as cigarettes, affecting the right to health.

• Legal strategies that prevent the state from protecting people from human rights impacts (potentially various), for example:

  • seeking to use investment treaties (including stabilization clauses) and closed arbitration processes to limit states’ abilities to enact or amend legislation or regulations that increase human rights protection;

  • seeking to enforce intellectual property rights against public health imperatives.

• Climate transition or circular economy strategies that hinge on exploitative land/resource use, where there are no, or poorly enforced, labor/environmental laws or informal labor arrangements, for example:
  • land acquisition/use to facilitate renewable energy or biofuel cultivation in geographies where land ownership or resource use may be contested, with implications for Indigenous Peoples’ and community land rights, as well as human rights defenders (see also Red Flag 12)

  • transitioning from sourcing fossil fuels to sourcing biomass for electricity generation without measures to address health and social impacts disproportionately experienced by “poor, Black and rural communities in the South” (see also Red Flag 13)

  • relying on informal labor in recycling hubs (e.g., for EV battery component recovery) or other waste recovery/collection operations (e.g., “waste pickers”) in geographies with absent or poorly enforced labor laws and hazardous working conditions (see also Red Flags 17 and 18)

  • sourcing critical minerals (e.g., cobalt, copper, lithium) or other primary materials (e.g., polysilicon and rare earth elements) needed for low carbon and digitalization technologies from operations linked to child or forced labor, unsafe working conditions and local environmental degradation (see also Red Flag 14)

  • relying disproportionately on nature-based solutions or carbon offset projects located in jurisdictions with poor or poorly enforced laws and regulations around land, labor and Indigenous Peoples, resulting in negative impacts on workers and communities (see also Red Flag 14)

• Reputational and operational: Risks arise due to inconsistencies between what the company says in public and in private regarding regulatory protections, and in what it does in different parts of the world based on different levels of regulatory protection. Reputations may also be open to attack where the company invests considerable resources in weakening human rights or environmental protections. Some examples of where these types of risks have arisen include:

  • Kellogg’s attracted negative attention when it sued the Mexican government over a labelling policy requiring food manufacturers to include warning labels on the front of any boxes they sell in Mexico to educate consumers on excess sugar and fat. Similarly in the USA in 2023, major food manufacturers including General Mills, Kellogg’s, Conagra, and trade bodies like the Consumer Brands Association strongly opposed updated FDA proposals restricting the “healthy” label for foods high in added sugars, sodium, or fats. They argued the rules violated First Amendment rights and unfairly targeted nutrient-dense foods. Media highlighted that corporate claims were “drawing on big tobacco’s playbook,” with critics pushing back on potential conflicts of interest and misalignment with public health goals. 

  • The Guardian reported on a leaked email sent by a senior executive from Philip Morris International regarding their lobbying plans to counter the World Health Organization’s efforts to crack down on vaping by young people and further smoking restrictions.

  • The Association of Convenience Stores (ACS), which includes major UK supermarkets like Sainsbury’s and Asda, has lobbied UK MPs to weaken or block a planned ban on disposable vapes, which aims to address the negative health impacts of disposables for young people and other vulnerable users. Public health groups have again argued that this behavior is “straight from the playbook of Big Tobacco”.

Reputational, regulatory and financial risks:

• As part of its climate change strategy, Drax Group transitioned from a coal-fired power generator into Europe’s largest biomass energy producer. In lieu of coal, the company now sources and burns wood pellets—often from mature forests in the U.S. and Canada. Advocates from civil society organizations (CSOs) have argued that the mills that process these pellets are disproportionately located in low-income, predominantly Black communities, where emissions of particulate matter and VOCs have been linked to respiratory illness. As a result, the company has faced reputational impacts (it is the subject of several CSO campaigns, such as StopBurningTrees.org, BankTrack, Just Transition Wakefield), regulatory action (in 2021, one of their US-based wood pellet facilities faced a USD2.5 million air pollution fine) and been dropped from sustainable investment indices. The company is also the subject of regulatory scrutiny, as they continue to lobby with the objective of influencing the UK’s renewable energy regulatory support program in their interests.

Legal and financial risk:

• Where a company mounts an unsuccessful legal challenge to government regulation aimed at public protection, it may face financial penalties, as in the case of tobacco company Philip Morris International, which was ordered to pay the Australian government millions of dollars after unsuccessfully suing the nation over its plain-packaging laws.
• A Florida court ordered Chiquita Brands International to pay $38 million to the families of eight men that were murdered by paramilitary forces financed by the company to facilitate their operations in Colombia in the absence of local law enforcement capabilities, which company executives cited as “the cost of doing business in Colombia”.
• Meta has faced civil society scrutiny, as well as a $150 billion class-action lawsuit and a U.S. Securities and Exchange Commission whistleblower complaint related to the platform’s expansion into Myanmar, where it has been accused of playing a pivotal role in the dissemination of hate speech that fueled violence against the Rohingya people. The accusations tie back to their alleged exploitation of weak governance and institutions.
• Financial risks: can arise where investors consider companies’ attempts to influence public policy in their investment decisions. For example:

  • US-based Trillium Asset Management reportedly monitors the levels and recipients of corporate giving, corporate policies on political contributions and membership of industry (lobbying) associations as part of their background research for stock selection in their socially responsible investment funds.

  • In 2022, Netflix’s shareholders approved a proposal on enhanced lobbying disclosure and oversight (garnering 60% support from the company’s shareholders) led by Boston Common Asset Management.

  • During the 2021 shareholder voting season, a series of shareholder proposals seeking stronger disclosure of how a company’s climate lobbying aligns with the Paris Agreement won majority votes from the shareholders of Delta Air Lines, Phillips66, Norfolk Southern Corp, ExxonMobil, and United Airlines. Further, a shareholder resolution against Nippon Steel Corporation in June 2024 seeking enhanced transparency on lobbying expenditures and positions garnered nearly 30% of the shareholder vote indicating growing concern of this issue in Asia. (see also Red Flag 25)

Under the UN Guiding Principles on Business and Human Rights, the corporate responsibility to respect human rights “exists independently of States’ abilities and/or willingness to fulfil their own human rights obligations, and … exists over and above compliance with national laws and regulations protecting human rights” (Principle 11, Commentary). In other words, “all business enterprises have the same responsibility to respect human rights wherever they operate” (Principle 23, Commentary), whether or not they have a domestic legal obligation to do so. As such, adopting an inherently uneven, compliance-based approach risks breaching the company’s responsibility in places where laws do not meet internationally accepted human rights standards.

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] …. lobbying activities where human rights are at stake” (Principle 16, Commentary).

Where the company actively lobbies against or takes action to constrain laws that have the practical effect of furthering respect for human rights, it risks contributing to human rights impacts, whether as a sole contributor or as a result of the aggregate contribution of several actors.

Where a company is benefiting from an absence of protection of rights in the countries where it operates, it may be directly linked to impacts; where it is aware of this and does nothing, it may, depending on a number of factors, be considered to be contributing to the impacts.

Addressing impacts on people associated with this red flag indicator can contribute to a range of SDGs depending on the impact concerned, for example:

• SDG 3: No poverty, in particular Target 3.5: strengthen the prevention and treatment of substance abuse, including narcotic drug abuse and harmful use of alcohol; and Target 3.10: strengthen the implementation of the World Health Organization Framework Convention on Tobacco Control in all countries, as appropriate.

• SDG 8: Decent Work and Economic Growth, in particular Target 8.5: by 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.

• SDG 12: Responsible Consumption and Production, in particular Target 12.2: Sustainable Management and Use of Natural Resources and Target 12.5: by 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse.

• SDG 13: Take urgent action to combat climate change and its impacts, in particular Target 13.2 integrate climate change measures into national policies, strategies and planning and Target 13.4 implement the UN Framework Convention on Climate Change.

• SDG 16: Peace, justice and strong institutions, in particular: Target 16.7: ensure responsive, inclusive, participatory and representative decision-making at all levels; and Target 16.10: ensure public access to information and protect fundamental freedoms, in accordance with national legislation and international agreements.

• Do we have a policy on when and how we will lobby against regulatory initiatives that include provisions aimed at access to information, improving consumer health or protecting other human rights? Are we aware of lobbying being undertaken on our behalf via trade associations and have we assessed those positions in light of our own commitments and responsibilities?

• Have we assessed whether and to what extent our engagements with governments on regulatory developments are in line with our responsibility to respect human rights and the environment and enable governments to introduce human rights or environmental protections?

  • Have we examined our lobbying activities in light of our own human rights commitments and strategies?

  • Have we taken action to address any misalignments between our climate change lobbying and/or the climate change lobbying activities of our trade associations, coalitions, alliances or funded thinktanks and our publicly stated climate commitments?

• Do our government affairs team engage routinely with our corporate responsibility/ sustainability/ human rights teams, with a view to internal alignment?

• Where we use external lobbying organizations, are our corporate responsibility/ sustainability/ human rights team consulted on the terms of their mandate?

• Do we disclose our position on key public policy issues? Do we reveal our external memberships, donations and methods of influence? If not, why not?

• Do we disclose our operations (inclusive of tax activities) and primary sourcing countries across different geographic jurisdictions? If not, why not?

• Applying purpose and principles to lobbying activities:

  • In 2017 Campbell’s Soup withdrew from the Grocery Manufacturers Association citing “our purpose and principles,” including positions on food labelling. When the United States Food and Drug Administration agreed to extend a deadline for food and beverage companies to introduce a “Nutrition Facts Panel,” the company announced it was “continuing to strive to meet the original deadline.”

  • AP7, BNP Paribas Asset Management and the Church of England Pensions Board collaborated to develop The Global Standard on Responsible Climate Lobbying, which is intended to bring about transparency and accountability for the commitment of investors and companies to responsible climate lobbying.

  • In 2024 and 2025, Unilever undertook a Climate Policy Engagement Review to assess the degree of alignment between the company’s climate policy positions and the positions of the trade associations to which the company is a member. Following the review, the company has publicly committed to rectifying the misalignments, including using its leverage to urge more proactive climate policy positions from the industry bodies with which it works. As a result of its efforts, Unilever was ranked as the highest-scoring company by InfluenceMap, which annually tracks corporate climate lobbying behavior, and, as of May 2025, remains the highest scoring company.

  • Recent CEO Water Mandate initiatives (Net Positive Water Impact and Forward Faster Initiative) are underpinned by its Principles for Responsible Water Policy Engagement, which speak to the manner in which companies can responsibly engage on water-related policy.

• Contributing to a regulatory environment that enables respect for rights:

  • In 2020, 101 investors came together under the Investor Alliance for Human Rights, to call on all governments to develop, implement and enforce mandatory human rights due diligence requirements for companies headquartered or operating within their own jurisdictions or, where appropriate, to further strengthen these regulatory regimes where they already exist. The IAHR also hosts an EU-specific Regulations Thematic Investor Group which aims to influence EU sustainability legislation.

  • Oil and gas companies have jointly pressed a government to improve transparency requirements before proceeding with bids for concessions, in order to level the playing field and avoid human rights performance becoming a competitive issue. (See Shift’s Using Leverage guide at p. 22).

  • The Extractive Industries Transparency Initiative is a multistakeholder initiative — involving governments, companies, and civil society — focused on promoting transparency in the oil, gas, and mining sectors. Membership is voluntary, but membership requires public reporting of payments, contracts, and industry data, with the intent of improving oversight of natural resource revenues, improving, government accountability and enabling more informed public participation in decisions that affect peoples’ livelihood and environments.

  • The Bangladesh Accord on Fire and Building Safety, signed in 2013 after the Rana Plaza factory collapse, is a legally binding agreement between global garment brands, trade unions, and NGOs to improve workplace safety in Bangladesh’s garment sector. It established independent factory inspections, public reporting, and mechanisms for workers to raise safety concerns. In 2023 a renewed International Accord was signed and, effective since November 2023, is a framework agreement for implementing country programs in Pakistan, Bangladesh and any future programs in other garment producing countries.

  • 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.

• Examples of sector-specific collaborative initiatives:

  • The Voluntary Principles on Security and Human Rights (VPSHR), launched in 2000, is a voluntary, multi-stakeholder initiative—comprising governments, extractive and energy companies, and NGOs—that offers guidance to ensure security operations respect human rights. It establishes three core areas: risk assessment, and protocols for engaging with both public and private security providers—including proportional use of force, human rights training, credible investigation of abuse allegations, and regular community consultation.

  • The Fair Circularity Initiative brings businesses, including Pepsico, TetraPak and Unilever, together to work toward respecting the human rights of workers within the informal waste sector, including through collaboration with local waste picker organizations in different regions.

  • In 2019, three leading apparel brands, a denim supplier, and a coalition of labor unions and women’s rights organizations signed an agreement to prevent and address gender-based violence and harassment in garment factories in Lesotho. 

• Companies striving to ensure a living wage across their operations and supply chain seek to mitigate the effects of operations in countries in which there is no, or an inadequate, minimum wage. ACT (Action, Collaboration, Transformation) is an “agreement between global brands and retailers and trade unions to transform garment, textile and footwear industry and achieve living wages for workers through collective bargaining at industry level linked to purchasing practices.” Through industry-level collective bargaining in sourcing countries, companies seek to avoid competing with each other based on lower wages (and regulations that enable this), but rather on other factors.

• Mondragon is a federation of worker-owned cooperatives based in Spain’s Basque Country, operating across manufacturing, retail, finance, and education sectors. Each of the federation’s 70,000 workers is a co-owner with equal voting rights and equitable profit sharing, with Executive pay capped relative to the lowest-paid worker. The model does not rely on relocation to lower standard jurisdictions, but instead emphasizes local employment and democratic governance.

General

• UNEP Finance Initiative Human Rights Toolkit for Financial Institutions helps financial institutions align their practices with the UN Guiding Principles on Business and Human Rights

• Investor Alliance for Human Rights Investor Toolkit on Human Rights is for asset owners and managers to address risks to people posed by their investments.

Responsible policy & political engagement

• Oxfam (2024) Right-sizing Corporate Voice: A briefing for business on responsible political engagement.

• BSR (2019) Human Rights Policy Engagement: The Role of Companies details a human rights-supportive approach to public policy engagement.

• The Good Lobby Tracker helps interested stakeholders to select appropriate methods and standards with assessing the political footprint and conduct of companies.

• The Responsible Lobbying Framework outlines what responsible lobbying would look like and can act as a tool for evaluating a specific organization’s lobbying activities.

• Global Standard on Responsible Corporate Climate Lobbying can help companies and investors to assess and ensure that lobbying efforts are directed towards the attainment of the Paris Agreement goals.

• LobbyMap is a system for tracking corporate climate policy engagement

• Transparency International Ireland (2015) Responsible Lobbying Guide was produced to promote better compliance with regulations and ethical principles by lobbyists in the private and non-profit sectors.

Fair Circularity

• WIEGO Advocacy and Worker Education Hub provides education, toolkits, position papers and other resources to assist workers in informal employment to secure their rights.

• Fair Circularity Initiative which is focused on how to respect rights in circular value chains

Sector-specific tools and resources

• ACT (2023) Accountability and Monitoring Report is a comprehensive report that showcases collaborative efforts among brands and retailers to design, measure, and monitor transformative practices.

• Swedwatch (2025) Human Rights Defenders at Risk in the Transition to Green Energy details how much of the renewable energy expansion is happening in countries with restricted civic space and weak human rights protections and how this puts communities, especially human rights defenders, at risk of harassment, legal persecution and violence.

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

Digitalization – understood as the process of leveraging digital technologies to transform business models – includes increased use of generative AI and other forms of automations, such as replacing people with robots. Digitalization is driven by technological advancements and reduced technology costs, competitive pressure and efficiency gains, increased need for data-driven decision making, increased labor costs and changing workforce demographics (aging and labor scarcity).

Additionally, the COVID-19 pandemic forced many companies and industries to embrace digital solutions and remote capabilities, further accelerating the digitalization of business.

Technologies such as artificial intelligence (AI), Internet of Things (IoT) and cloud computing, are all key enablers in digitalization of businesses.

Technological change is currently predicted to be the most divergent labor market change, with broadening digital access expected to both create and displace more jobs than any other macrotrend (19 million and 9 million, respectively). Meanwhile, trends in AI and information processing technology are expected to create 11 million jobs, while simultaneously displacing 9 million others, more than any other technology trend. Robotics and autonomous systems are expected to be the largest net job displacer, with a net decline of 5 million jobs.

Research shows that at most 2.3% of jobs across the world have the potential to be fully automated. Many jobs, however, have a significant percentage of automatable activities. Automation’s greatest impact is forecast to be on jobs that consist of routine activities in predictable environments.

Digitalization of processes through automation and the use of AI can have a number of positive impacts.

In the short term, it can:

• Remove unsafe jobs: in mining, robots can help remove people from dangerous underground jobs, for instance, in Resolute’s Syama mine in Mali.

• Help people with restricted physical ability work.

• Make jobs more accessible for local workers: in mining, robots can provide a simpler visual interface which makes it easier for companies to train local workers, rather than rely on highly skilled workers from outside the area.

• Help manage labor shortages: for example, labor shortages exacerbated by Covid-19 incentivized investment in agricultural robots.

• Increase access to e.g. healthcare, education and financial services through the use of AI solutions.

In the long term, AI and automation can create new jobs and increase the need for higher-skilled workers.

Estimates of the number of automatable jobs vary quite widely. For example, a study by McKinsey estimates that 50% of current work activities are automatable, and that by 2030, 400 million workers could be displaced by automation and 75 million will need to change occupational category. This shift will put enormous pressure on workers around the world.

Automation and the use of AI can more negatively affect people who are already vulnerable: low paid and precarious workers, workers in least developed countries, women and minorities that are over-represented in automatable jobs or under-represented in sectors that are likely to experience job growth. For example:

• In the US, African American workers are projected to be disproportionately affected by automation because they are over-represented in sectors such as transportation, food service and office clerks. According to research of 2022 data, some 24 percent of all Black workers are in occupations with greater than 75 percent automation potential, compared with just 20 percent of White workers.

• In Bangladesh, automation in the ready-made garment (RMG) industry has resulted in a 31% decline in the workforce and disproportionately affects women, who comprise 80% of the workforce in the sector.

• The fact that many jobs can be replaced by AI also potentially disrupts the role of trade unions and strike actions, as demonstrated by a case related to the New York Times, where an AI company offered to replace the striking workers with AI solutions, effectively undermining the strike action.

The negative impacts of digitalization on people are in large part a result of the way in which companies introduce and use robots and AI solutions. The common denominator in cases of digitalization going wrong (where workers are dehumanized and seen as another input or cost in the production process) is lack of empathy: the ability to put oneself in someone else’s shoes.

When companies introduce digitalization without empathy with workers, the risks to people can be:

• Loss of Livelihood: Workers who lose their job because they are unable to relocate, retrain or redeploy. ILO research shows that the potential impact on women is roughly 2.5 times greater than on men. Estimating that 1.4% of men’s jobs globally have the potential to be automated, compared with 3.7% of women’s employment. In high-income countries, where clerical jobs (typically held by women) make up a greater proportion of occupations, the effects are more striking: 2.9% of men’s jobs compared with 7.8% of women’s jobs.

• Lower Wages: Studies have found that workers directly affected by robot adoption—particularly those in routine blue-collar roles—experienced wage decreases of approximately 6%. Other studies indicate that displaced low-wage workers may suffer a 13% reduction in income six years after job loss. Research also shows that technology which replaces workers without increasing productivity tends to depress wages of low-skilled workers. Other research indicates that growth in the wage gap in the U.S. could come from automation displacing low-skilled workers. In terms of young workers, a 2019 study focused on the U.S. Midwest indicated that an increase of one robot per 1,000 workers correlated with a 4% to 5% wage decline for young, less-educated men and women in manufacturing sectors. It found that minority young workers in the sample – less-educated Black men and women – faced the most significant negative impacts from robot adoption, exacerbating existing wage disparities.

• Workplace Accidents: While automation of hazardous tasks leads to a decrease in work-related injuries, an investigation into Amazon warehouses where robot use has increased, showed that injuries were 50% higher, due to increased productivity targets for workers rolled out as a result of the productivity gains of automation.

• Mental Health Problems: Research shows that automatable work has a detrimental impact on the mental health and life satisfaction of workers within some industries, particularly those with higher levels of job automation risk, such as manufacturing. Other studies show robot penetration was associated with sizable increases in drug and alcohol-related deaths and mental health problems among current and former workers. The OECD notes that AI-driven tools can lead to a decline in social contact and negatively affect workers’ well-being and productivity. A study analyzing data from 20 European countries found that increased robot adoption led to significant declines in workers’ sense of autonomy and job meaningfulness. The integration of AI tools for monitoring productivity has led to increased surveillance, causing stress and anxiety among workers. For instance, UPS drivers reported that sensors in delivery vehicles tracked every aspect of their workday, leading to feelings of constant scrutiny and reduced autonomy.

• Rising income and wealth inequality: While automation and robots have already displaced low- and middle-skill jobs involving routine tasks, generative AI’s capabilities extend to more intelligent automation, potentially replacing more advanced tasks and occupations. Studies show that this could lead to an increase in income and wealth inequality, which in turn and over time can impact the enjoyment of a wide range of human rights, such as access to basic goods and services as a result of increased costs of living.

In the context of the low carbon transition, digitalization can enable and accelerate decarbonization, for example through the use of automation, robots and AI to optimize efficiency, reduce energy consumption, enhance worker productivity, as well as help to address labor and skills gaps. However, there may also be negative impacts for people, such as employers bypassing workforce training and upskilling by deploying digital and AI solutions in response to “green skills” shortages.

Further, if not managed appropriately, the simultaneous economic transformations of decarbonization and digitalization have the potential to exacerbate impacts on people within sectors. For example, in the oil and gas sector, skilled labor for roles such as oil and gas exploration may become increasingly automated, while overall demand for fossil fuel exploration is declining in response to the low carbon transition, amplifying the impact on jobs.

Finally, whilst AI can be used to improve efficiencies, AI & blockchain solutions are very high energy consumers and significant contributors to global GHG emissions, which, left unaddressed, will contribute to worsening physical climate impacts. (See Red Flag 25)

A company may contribute to negative human rights impacts when it lays off workers as a result of rapid digitalization without first trying to offer re-skilling or upskilling opportunities.

For example, in contexts where there is a weak social safety net or where workers lack alternative employment options or sources of income, rapid digitalization can result in job losses that leave workers without ways to secure an adequate standard of living. Compounded by the socio-economic context, this can negatively affect workers’ right to health, adequate housing and nutrition.

Buyers and investors may also contribute to negative human rights impacts if they require, respectively, their suppliers or investee companies to digitalize with no time to support workers in contexts where there are weak social safety nets.

A company that enables the digitalization of other industries, e.g. by developing AI and automation solutions, may contribute to negative human rights impacts by providing such solutions to customers without considering mitigation measures such as supporting affected workers in the transformation.

Technological progress is crucial to the fulfilment of all the SDGs, including with respect to SDG 7 Affordable and Clean Energy, SDG 12 Responsible Consumption and Production, and SDG 13 Climate Action. However, to be true to the purpose of the SDGs, the use of technology needs to be underpinned by an understanding of how the loss of jobs due to digitalization can affect people’s basic dignity and rights.

Digitalization with empathy and with support for workers to re-train or upskill can help companies fulfil the following SDGs:

• SDG 8.5: Achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities

• SDG 9.2: Promote inclusive and sustainable industrialization

While the scale of digitalization’s impacts on people is undeniable, the nature and gravity of those impacts will depend on the way in which companies apply technology. This includes the due diligence companies carry out to identify and address negative impacts on people. Important questions to consider are:

• Does the company have a culture of empathy that looks not just at the benefits but also the human impacts of digitalization?

  • Do we seek to understand what workers expect from their jobs in terms of progression and development?

  • Do we ask how workers feel about the technology that surrounds them at work?

  • Do workers have alternative employment options? (Are we the only significant employer in the local area?)

  • How robust is the social safety net for workers who are displaced from their jobs?

• Does the business have in place processes to minimize the harm to workers of introducing and using robots and AI solutions?

  • Do we have a process to assess impacts on people of new technology or automation in our operations?

  • Do we look for unintended negative consequences from technology meant to make work “faster and easier”?

  • Do we provide workers with opportunities for continuous learning? Do we recognize and reward that learning?

  • Are our governance and internal processes and controls able to manage the additional complexity that comes with automation and technology?

  • How do we engage with other stakeholders – including governments and trade unions – to identify ways to prepare workers for a changing landscape of work?

  • Have we considered what part of our workforce (specific job roles, geographies etc.) may be especially vulnerable to impacts as a result of digitalization?

  • Does the company support workers in the transformation to the need for new skills as a result of digitalization?

  • How does the company propose to fill any skills gaps resulting from digitalization? Are there plans for retraining/upskilling staff?

  • Has the company considered the energy consumption involved with digitalization, e.g. use of AI, automation etc. and associated impacts on people?

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

Companies that introduce rapid digitalization should take steps to identify and mitigate the potential negative impacts on workers who lose their jobs as a result.

Mitigation examples fall into four categories:

• Engaging with Workers: Giving workers early notice that their jobs will be affected and engaging with them to understand their needs and expectations. Examples are:

  • Research and forecasting: The European Centre for the Development of Vocational Training provides skills forecasts showing changes in the labor force and types of job openings, which enable workers, employers and governments to prepare in advance.

  • Engaging workers in the transformation: IBM has adopted a policy of open dialogue regarding workforce transformations involving AI. In which the company updates impacted team members through employee forums and dialogues.

  • Moderna merged its technology and human resources departments to address the evolving landscape shaped by AI advancements. It reports that this move aimed to redefine work responsibilities, distinguishing between tasks best suited for humans and those that can be automated.

  • Accenture involved its employees in designing and testing a custom version of OpenAI’s ChatGPT to assist in crafting sales proposals, engaging staff in the development process and providing training.

• Supporting Redeployment or Relocation of Existing Workers: Companies can redeploy workers through upskilling or retraining. Examples are:

  • Companies such as Amazon, IKEA and Pwc have announced programs to upskill their workforce to help them move from positions vulnerable to automation to other jobs.

  • Pilot projects in Bangladesh aim to increase workers’ digital literacy and use of computer-based design to adapt to the increased use of automation in garment factories, at the same time addressing gender imbalances by focusing the training on women.

  • The Georgia Artificial Intelligence in Manufacturing (AIM) program, launched by Georgia Tech, aims to reskill manufacturing workers by providing training in AI and emerging technologies. This initiative supports small and mid-sized manufacturers in adopting smart technology and establishes a pipeline of skilled workers to sustain employment in the manufacturing sector.

• Supporting Future Workers to Access the Labor Market: Examples of companies helping future workers develop skills abound, including:

  • Collaborating to help unemployed youth enter the labor market: in the UK, companies such as Centrica, Tesco and Starbucks have partnered with Movement to Work to implement programs to tackle youth unemployment.

  • IBM’s SkillsBuild is a free education program aimed at underrepresented communities, including adult learners, high school and university students, and faculty. It offers over 1,000 courses in 20 languages covering topics like artificial intelligence, cybersecurity, data analysis, and cloud computing. Participants can earn IBM-branded digital credentials recognized in the industry.

• Using Leverage to Advocate for Public Policies: e.g. wage insurance, universal basic income, smart taxation, closing the gender gap in STEM degrees (only 27% are women).

  • Businesses can use their leverage to signal to governments changes needed in education curricula: for example, the Confederation of British Industry has commissioned research to better understand the curriculum changes needed to prepare young people to access the labor market.

  • The Future Skills Centre in Canada emphasizes the pivotal role of employers in upskilling initiatives. However, employers face barriers such as time, cost, and information constraints. The Centre is piloting approaches to enhance employer engagement, especially among SMEs, to ensure training efforts are targeted and effective.

  • The Social and Economic Council of the Netherlands is a multi-stakeholder body composed of trade unions and employers’ organizations which makes recommendations to the government on how to mitigate the negative impacts of robotization in the labor market. This type of dialogue can help governments drive education and social policy to better prepare future workers and to prevent the dislocation associated with an increase in automation.

  • France, Italy and Singapore have created personal training accounts, which allow workers to accrue credit which they can use towards training and upskilling and is transferable between employers. This provides workers with training opportunities that are not tied to their current employer.

  • Countries are also creating “skills ecosystems” that enable workers to chart their career path and access lifelong learning, such as Singapore’s Skills Future Movement.

General

• UNDP Human Development Report 2025 – A matter of choice: People and possibilities in the age of AI (2025)

• OECD Employment Outlook 2024: The Net-Zero Transition and the Labour Market (2024)

• International Labour Office (2019) Work for a brighter future: Global Commission on the Future of Work.

• WEF, Future of Jobs Report (2025)

• OECD, Who Will Be the Workers Most Affected By AI, (2024)

• Luxembourg Institute of Socio-Economic Research (LISER), Augmenting or Automating Labor? The Effect of AI Development on New Work, Employment, and Wages (2025)

• Oxford Internet Institute, University of Oxford, Complement or substitute? How AI increases the demand for human skills (2024)

• Universidade Federal do Rio de Janeiro, AI in the Workplace: A Systematic Review of Skill Transformation in the Industry (2024)

• AI & Society, Artificial intelligence and work: a critical review of recent research from the social sciences (2022)

• OECD, Equipping and training workers with the right skills for the Green and AI transitions (2024)

Sector specific

• ILO, David Kucera and Fernanda Bárcia de Mattos (2020) Automation, employment and reshoring: Case studies of the apparel and electronics industries: a study of automation in the apparel and electronics industries.

• Artificial Intelligence and the Energy Transition (2025)

Regional

• IMF, The Labor Market Impact of Artificial Intelligence: Evidence from US Regions (2024)

• OECD, AI-WIPS, Artificial Intelligence and Employment: New Cross-Country Evidence, (2022)

• Indian Institute of Technology Jodhpur, Skill-Based Labor Market Polarization in the Age of AI: A Comparative Analysis of India and the United States (2025)

• Journal of Technology Innovations and Energy, The impact of Artificial Intelligence and Machine learning on workforce skills and economic mobility in developing countries: A case study of Ghana and Nigeria (2023)

• Valley View University, Accra, Ghana, The Impact of Artificial Intelligence on Employment: Evidence in Africa (2023)

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

• An estimated 1.23 billion people are directly employed in agrifood systems, contributing to food supply through complex value chains. According to the UN Food and Agriculture Organization (FAO), while agrifood systems provide employment around the world, they do not always provide an acceptable standard of living and quality of life. In fact, too often, vulnerable populations are left behind across agrifood systems” and often they “bear the greatest burden of the social hidden costs of agrifood systems.”

• Farmers and smallholders have limited influence in negotiating terms of trade and capture only 6% of all generated income from the global food system supply chain.

• A range of structural barriers underlie this disadvantage, at the levels of the supply chain, commodity sector and public policy. ETI notes that business models intersect with these barriers in many ways, including:

  • Consolidation of the market into a limited number of food retailers with substantial market power, that is often used to drive down prices and leave farmers unable to negotiate higher pricing;

  • The effect of lowest cost or “discounter models” in the food retail sector, driving price competition and increased pressure on prices in the supply chain

• Price squeezes on suppliers increase the risk of human and labor rights violations in food and farming supply chains, often affecting the most vulnerable in rural communities, including small-holder farmers, particularly women and migrants. For example, as of September 2022, cocoa farmers in Cote D’Ivoire were earning between 38 and 42 percent of a living income and in Ghana, roughly 40 percent of a living income. The inability of a farmer to provide for his or her family leads to a considerable loss of dignity in some rural communities, increasing marginalization and compounding the risk of human rights impacts.

• With respect to some commodities, farmers and their families find themselves in a poverty trap: without funds or investment to grow high-quality produce or plan ahead, they face low prices and/or harvest early, reinforcing the poverty cycle.

• Further, a lack of living income is closely linked to wider human rights abuses in global agricultural supply chains. In sectors like cocoa in West Africa, where many farmers earn far below a subsistence income, families often rely on child labor to meet harvest demands. This income deprivation fuels cycles of poverty, limiting access to education, healthcare, and decent work for future generations. Addressing living incomes for farmers is therefore central to breaking the systemic conditions that enable child labor to persist. Further, without capital to invest in new farming equipment they are unable to upgrade to equipment that is safer, more energy efficient and less labor intensive.

• Climate change can intensify the impacts resulting from this business model risk in a variety of ways. Climate stresses are increasing the vulnerability of small-scale farmers and their households to poverty. As global and local temperatures increase, smallholder farmers are more frequently facing heat stress, which can impact productivity, as well as farmer health and ability to work. These risks are expected to compound and cascade as temperatures continue to rise. For example, a study published by the World Meteorological Organization projects that in sub-Saharan Africa and Southeast Asia, heat stress in a 3°C climate scenario will result in a 30-50% reduction of agricultural labor capacity, which would then increase food prices, making food stuffs increasingly unaffordable for poorer communities.

• Increased frequency and duration of extreme heat, along with droughts and floods, can result in crop losses, impacting crop production, crop lifetimes, and pricing with corresponding impacts on farmer livelihoods. For certain crops, land suitability will be at risk: for example, analysis from Zurich University of Applied Sciences suggests that climate change will reduce the most suitable existing coffee lands by more than 50% by 2050.

• While there is evidence of smallholder farmers exploring different adaptation strategies in response to increased climate stress, they face several challenges, including limited access to information, finance, technological options, knowledge, and skill – and, for women farmers, gender discrimination. And without effective and sustained adaptation strategies, worsening climate conditions can make farmers’ earnings even more unpredictable and precarious, further intensifying the impacts of this business model feature.

• Finally, in response to corporate net zero commitments, company climate mitigation actions that fail to consider impacts on people can also impact agricultural value chains. Pressure to reduce greenhouse gas emissions and move to regenerative agriculture could lead companies to reduce reliance on smallholder farmers within company value chains, adjust sourcing strategies to minimize transportation emissions or place greater emissions reduction requirements on farmers with limited resources, putting further downward pressure on farmer incomes.

• Legal, Financial, Regulatory, Operational and Reputational Risks:

  • Undue price pressure on supply chains in certain geographies can lead to civil society campaigns, resulting in damage to reputation, brand and customer loyalty. For example:

    • Amnesty International’s “Big Palm Oil Scandal” campaign, named several large brands (e.g., Nestle, Colgate-Palmolive, Wilmar) highlighting poor labor practices at the plantations supplying their palm oil.

    • The 2023 Corporate Accountability Lab report on the cocoa supply chain names several multinational cocoa and chocolate companies (e.g., Mars, Nestle, Cargill and Ferrero) and highlights the incongruities between seemingly extravagant corporate capital expenditures with the comparative costs of paying agricultural suppliers a living income.

  • Extreme price pressure on farmers can undermine availability of product and stability of supply in the near term; over time it can contribute to an exodus from farming. For example, in Australia, two major Australian supermarkets (Woolworths and Coles) were accused of aggressive negotiating tactics by farmers’ representatives, who claimed that farmers were being “held to ransom by a large corporate duopoly”, which is in turn “contributing to the wide-scale bulldozing of orchards and an industry exodus.” The allegations resulted in significant media scrutiny, public demands to “break up” the large super market chains, a senate inquiry, as well as a government-imposed mandatory Food & Grocery Code of Conduct for retailers and wholesalers with over AUD 5 billion in annual grocery revenue. As of 1 April 2025, breaches of the code face financial penalties (greater of: AUD 10M, 3 times the value of the contravening conduct, or 10% of turnover for the preceding 12 months).

• Business Opportunity:

  • A brand proactively addressing the ways in which commodities are sourced to minimize adverse impacts on people can be rewarded with positive consumer perceptions. For example in a 2023 survey, 79% of consumers said that if a brand’s products bear the Fairtrade International mark that would positively impact their perception of that brand.

  • Proactively addressing human rights risks related to farmer incomes strengthens supply chain resilience, reduces supply disruption risks, bolsters stakeholder trust, and enhances long-term sourcing reliability.

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).

• Companies sourcing commodities through their supply chain from farmers who receive less than a living income may be directly linked to impacts on the adequacy of the farmers’ standard of living.

• If a company’s purchasing practices push costs upstream in the supply chain – whether alone or as part of an industry-wide behavior – in ways that prevent farmers from achieving a living income, they contribute to the impacts experienced by farmers.

Addressing impacts on people associated with this red flag indicator can contribute to, among other things:

• SDG 1: Eradication of poverty in all its forms

• SDG 10: Reduce inequality within and among countries

• SDG 13: Take Urgent Action to Combat Climate Change and its Impacts, in particular target 13.1 Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries

Oxfam has noted that, “perpetually low income levels are one of the key reasons why farmers remain stuck in poverty…For many small-scale farmers, significant gaps exist between their actual income and income levels sufficient to ensure a decent standard of living…”. Oxfam cites structural barriers, including at the level of individual supply chains, which reinforce the “significant imbalance between the risks of agriculture shouldered by farmers and their power to shape their own market participation.”

By addressing the impacts on living income from corporate sourcing practices and price influencing, companies can contribute to lifting the poorest people in agriculture into more sustainable livelihoods, and in turn help them to escape poverty and realize their rights, from better health to nutrition to education.

• Are our purchasing practices designed to drive down pricing, or do they have the effect of doing so? How do we know?

• Is the duration of our supply chain commitments/contracts helping or hindering our ability to use our leverage to secure better prices for farmers?

• Have we explored increasing dialogue with, or forming partnerships with, farmers or cooperatives in our supply chain? Have we sought to understand the real costs associated with production of the commodity, based on their experience?

• Are we engaging in multi-stakeholder initiatives (MSIs) aimed at addressing human rights impacts with respect to the commodity on which we rely? Where a relevant MSI doesn’t exist, can we learn from such initiatives for other commodities and explore opportunities to create one?

• Have we explored how to engage and educate our customers if they must absorb some price increase to protect farmer living standards?

• Are we prepared to experiment – and learn from failures or missteps – in tackling the difficult challenge of livelihoods in supply chains? Can we explore opportunities to promote and facilitate the growth of new forms of business in our supply chain that can channel more resources to farmers (e.g. cooperatives, women-owned enterprises, social enterprises)?

• Do we understand the ways in which climate variability is impacting our suppliers and the steps we can take to address potential impacts for farmer incomes? What measures are we taking to address climate-related impacts on our suppliers?

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

• The Farmer Income Lab, launched by Mars, with Dalberg Advisors, Wageningen University 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.

• Companies participating in the voluntary Sustainable Vanilla Initiative commit to pre-competitive projects to improve quality, product traceability, good market governance and the livelihoods of smallholder farmers who form the foundation of the global vanilla bean trade.

• Nestle has developed its Income Accelerator Program, which aims to close the living income gap and reduce child labor risks, the progress of which is being independently monitored by the KIT Institute. The program pays cocoa-farming families annual cash incentives for practices like child schooling, agroforestry, and income diversification, with payments split between spouses to boost gender equality and resilience.

• Tony’s Open Chain, started by Tony’s Chocolonely in 2019, is an industry initiative in which participating cocoa companies sign on to the mission “to ensure cocoa households achieve a living income, eradicate child labor and protect forests by enabling responsible business conduct”. They pledge to source cocoa beans according to Tony’s 5 Sourcing Principles: traceability, higher prices, long-term commitments, strong farmer partnerships, and enhanced quality and productivity.

• OFI, one of the world’s largest cocoa, coffee, and nut traders, uses its Living Income Calculator to design income generating strategies for farmer groups across several of its sourcing locations and has committed to a living income target of 200,000 farmers achieving a living income and 1 million farmers receiving enhanced livelihood support, both by 2030.

• McCormick’s Grown for Good program is a third-party verified sustainability standard that directly links sourcing practices to farmer welfare. The company works with their “suppliers to increase the direct economic benefits generated by farmers and to remove unnecessary intermediaries”. The program also provides farmers with services like health insurance, access to finance and access to inputs which can help the farmers improve their yields and profitability and, in turn, build the reliability and resilience of McCormick’s supply chain.

• Oxfam has highlighted several examples of alternative models, including:

  • UK company Sainsbury’s Dairy Development Group: farmers have full membership within the group and equal votes in decision making on milk price.

  • Private company Apicultura Lilian, in Honduras: the company has a sourcing strategy focused on establishing a direct link with honey producers; it distributes 10% of its profits to supplier network and provides technical support and inputs to increase yields

• Princes Industrie Alimentari based in Italy is committed to ethical working conditions in the tomato supply chain and ahead of the 2022 harvest season they signed contracts to enhance financial security among growers.

• In India, the Regenerative Production Landscape Collaborative, initiated by the Laudes Foundation, IDH, and WWF India, offers a model of regenerative agriculture that addresses both livelihood and environmental challenges, such as pesticide pollution and persistent drought. This collaborative works to shift smallholder farmers across Madhya Pradesh from monsoon‑dependent monoculture cotton to regenerative intercropping and vegetable diversification. It brings together government, civil society, farmers, brands (e.g., H&M, Inditex, IKEA, PepsiCo) to drive regenerative practices, improve ecosystem health, and secure supply accountability. Early results report significant improvement in soil health, crop yields and farmer incomes through diversified crops and reduced input costs.

• Some initiatives appear to aim at “de-commoditization”: An impact investing fund created by Danone, Firmenich, Mars and Veolia with respect to vanilla, offers a 10-year commitment, cooperative and a minimum price, through an “innovative model where farmers and industry players share both the benefits and risks.” The project estimates that 60% of cured vanilla’s value will go back to farmers (compared to initially observed shares of 5% to 20%).

Cocoa

• Oxfam (2025) Raising the Bar: Supermarkets Must Urgently Address Structural Exploitation of Cocoa Farmers outlines the role supermarkets can play in supporting living incomes for cocoa farmers.

• Corporate Accountability Lab (2023) There Will be No More Cocoa Here: How Companies are Extracting the West African Cocoa Sector to Death.

• Wageningen University & Research (2024) High-level analysis of recent and current yield in the West African cocoa sector: Trends, possible causes and recommendations for interventions.

• Peter Stanbury and Toby Webb’s How to deliver real sustainability in the cocoa sector? Collaborative development governance puts the case for cross-cutting, long-term action.

Coffee

• Global Coffee Platform is a multistakeholder membership association focused on collective action on local priorities and critical issues for coffee farmers.

Tea

• Ethical Tea Partnership (2021) Climate Change and Tea explores how climate change is impacting the tea sector, including for the farmers and communities who rely on it for their living.

• Banerji, Sabita, Willoughby, Robin (2019) Addressing the Human Cost of Assam Tea: An agenda for change to respect, protect and fulfil human rights on Assam tea plantations. Oxfam Policy and Practice.

• Ethical Tea Partnership’s Responsible Contracting Pilot aims to embed responsible business practices in contracts.

• Business and Human Rights Resource Center Tea Supply Chain Tracker evaluated companies operating in the tea industry based on their human rights policies and standards.

Multiple commodities

• Fairtrade International (2024) Climate and the Environment reports on how climate change is eroding farmer incomes across multiple commodities and advocates for minimum pricing floors and living income benchmarks to mitigate these risks.

• The Living Income Community of Practice aims to increase understanding of living income measurement and the income gaps, identify and discuss strategies for closing the income gap and facilitate collaboration.

• Oxfam (2018), A Living Income for Small-Scale Farmers: Tackling unequal risks and market power discusses the barriers to raising small-scale former incomes and entry points for change.

• Oxfam (2018) Fair value: Case studies of business structures for a more equitable distribution of value in food supply chains explores 12 case studies to demonstrate that equitable business structures, such as farmer-owned cooperatives, and business arrangements including long-term and transparent contracts, profit sharing and producer participation in pricing committees, can result in farmers receiving a greater share of the value of the food they produce.

• FAO (2015) Inclusive Business Models Guidelines for improving linkages between producer groups and buyers of agricultural produce. FAO has developed guidelines that contain, inter alia, useful methodologies for buyers seeking to organize farmers into suppliers, which includes contract farming or out grower schemes.

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

• People are the core business of employment and recruitment agencies. As such, labor providers can positively or negatively impact the employees they recruit for client companies and the agency workers they place, as well as their families, and local communities in the migrant worker’s home state.

• Negative impacts can occur at all stages of the recruitment and employment process and affect workers’ rights, including their freedom from all forms of forced or compulsory labor; their right to just and favorable conditions of work; their right to privacy, women’s and migrant workers’ rights; the right to non-discrimination; the right to form and join a trade union and the right to collective bargaining; and the right to an adequate standard of living.

• Cross-border recruitment of migrant workers intersects with heightened vulnerability where individuals experiencing extreme poverty may feel their choices are limited and/or lack knowledge about their rights in the host state. Moreover, regulation that ties a worker’s immigration status to a particular employer (who acts as a sponsor), or which requires the worker to gain employer permission to exit the country, places the worker in a position of particular vulnerability: if the worker experiences abuse or exploitation, or sees his/her personal documents retained, it can be difficult to seek redress out of fear of losing a job and immigration status.

• Recent investigations into the practices of unscrupulous recruitment and employment agencies have revealed serious abuses in a variety of sectors:

  • A 2024 Oxfam report exposes how over 2.4 million migrant workers underpin European agriculture, particularly in Spain, Italy, France, Poland, and the Netherlands. Many are recruited through labor providers and informal intermediaries, which increases the risks of wage theft, unsafe housing, discrimination, and violence. Women migrants are especially at risk, facing lower pay and documented sexual exploitation.

  • Key findings from a report into the hotel industry in the United Arab Emirates and Qatar highlighted testimonies by some workers (mainly housekeepers, restaurant staff, security guards, drivers and stewards) who reported receiving half of the salary they were initially promised; ATM cards and other valuable documents were kept from them, deductions were frequently made from salaries for illegitimate reasons and their freedom of movement was severely curtailed.

  • There have been numerous reports of debt bondage and forced labor with respect to migrant workers in the electronics sector in Malaysia which supplies major brands in the Global North. There have been reports that workers, primarily from Nepal, Bangladesh, Indonesia and Myanmar, have not received the wages and accommodation promised by agencies, and moreover were forced to pay high sums (over $4,000 USD) to become employed in Malaysia. Workers claim their passports were confiscated, they received violent threats and were deceived about major elements of their work agreements.

• As the global economy accelerates its transition toward a low-carbon and climate-resilient future, demand for labor is shifting to the expansion of low carbon sectors, such as renewable energy. While such activities are vital for climate mitigation, they are increasingly dependent on low-paid, often migrant labor, sourced through labor providers. As in the other scenarios explored here, some labor providers impose high recruitment fees, provide workers with insecure contracts, withhold wages, impose excessive overtime, provide abusive living and working conditions, restrict worker mobility, any or all of which can leave workers vulnerable to exploitation and hazardous conditions.

• Simultaneously, the physical impacts of climate change already being felt globally — such as drought, extreme weather and environmental degradation — play a critical role, not only in driving vulnerable workers into precarious migration, but also at destination worksites across several sectors where workers are often exposed to dangerous climatic conditions, such as prolonged heat exposure, with limited access to health and safety protections. This intersection of unregulated labor recruitment and harsh outdoor working conditions, particularly prominent in the construction and agricultural sectors, undermines both human rights and climate resilience, while further reinforcing inequality.

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

SDG 5 Achieve gender equality and empower all women and girls, in particular:

• Target 5.2 End all forms of discrimination against all women and girls everywhere

• Target 5.3 Eliminate all forms of violence against all women and girls in the public and private spheres, including trafficking and sexual and other types of exploitation

SDG 8 Decent Work and Economic Growth, in particular:

• Target 8.5, By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value

• Target 8.7 Take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labor, including recruitment and use of child soldiers, and by 2025 end child labor in all its forms

• Target 8.8 Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment

SDG 13 Climate Action, in particular:

• Target 13.1 Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries.

The questions below are prepared from the perspective of a company interrogating its own use of labor providers. However, they can be adapted for use in engaging with other companies in the value chain about their use of outsourced labor. In this case, they might be prefaced with the question “What percentage of your workforce is sourced from third party labor providers/ recruitment agencies?”

• How does the company ensure protection of workers’ rights for outsourced labor? To what extent do policies and protections apply to temporary/agency workers?

• Have we reviewed the labor provider’s Code of Conduct and other relevant policies to check whether they include commitments not to charge recruitment fees to workers and not to retain their identity documents? Are there any “red flags” present, e.g. where the labor provider is unwilling to provide details about their processes or where there are historical complaints or negative findings against the provider?

• Is the labor provider offering “too good to be true” rates that would not allow it to meet minimum total wage costs (including sick pay and statutory holidays), business overheads, management costs, etc.?

• Do we have a clear service agreement with the labor provider, including clauses on social compliance (no recruitment fees, no unlawful retention of documents and valuables) as well as detailed charge rates, a confirmation that workers will be paid, a clear agreement to ensure the health and safety of all workers as a shared responsibility between the labor user and provider?

• Do we conduct checks or audits of our labor provider to check that proper recruitment and contractual arrangements are in place; wages paid are correct, on time and without improper deductions; there is no debt bondage, harsh treatment or intimidation; workers’ accommodation and working conditions are of an acceptable standard, etc.?

• Are the auditors and our staff equipped to detect the potentially complex pressures, abuses and exploitation of workers by labor providers?

• Are the workers on our site who work for labor providers aware of who to report problems to and are they likely to feel safe doing so? Are we sending the message that we take these issues seriously and are available to the workers who would want to raise issues? What is our process to handle any concerns or problems raised?

• Do we integrate the physical impacts of climate change, such as extreme heat, into occupational health and safety requirements for our direct and indirect workforce?

Below is a set of questions to consider asking in interviews of labor providers (and workers, where applicable) especially in higher risks contexts.

• Did the worker pay any money to the labor provider for the job?

• Did the worker travel from abroad for the job? Did he/she pay transport costs? Is the worker charged for transport to work; how much?

• Was the worker given a copy of the worker contract? Did he/she understand the content and expectations?

• Has the worker retained his/her own identity documents?

• How many hours a week does the worker work?

• What hourly rate does the worker receive? Are there any deductions, other than standard ones?

• Does the worker get paid regularly? Has the labor provider ever failed to pay the worker?

• Is the worker regularly exposed to extreme heat or other climatic conditions for extended periods of time? If so, how are such conditions addressed by the labor provider/employer?

• Where does the worker live? Is the accommodation provided by the labor provider? How many people is it shared with? How much rent does he/she pay?

• Does the worker seem uncomfortable and are they willing to share any issues?

• Do all the workers interviewed indicate they are happy and contented but do not seem so? Do they glance at anybody when answering questions?

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

Given the complex nature of the problem, often mitigation efforts take the form of sector-wide or cross-sectoral initiatives.

• The Responsible Labor Initiative of the Responsible Business Alliance is a multi-industry, multi-stakeholder initiative focused on the rights of workers vulnerable to forced labor in global supply chains. Activities include engagement with recruitment agencies with respect to fees charged to workers, including capacity building and preferential treatment for responsible agencies, and the repayment of recruitment fees by manufacturers and buyers where fees have been charged to workers.

• The Consumer Goods Forum’s Human Rights Coalition — Working to End Forced Labour is a CEO-led initiative working together as a Coalition to: implement forced labor-focused due diligence systems in their own operations; engage with suppliers to ensure due diligence coverage in upstream supply chains; and advocate for enabling policy environments to protect Workers’ rights and support business efforts.

• Food industry: In 2020, several major UK retailers, including M & S, Tesco and Sainsbury’s, united to drive the responsible recruitment of workers in global supply chain by sponsoring the Responsible Recruitment Toolkit, a package of support for suppliers and recruitment businesses to better embed ethical and professional recruitment and labor supply practices.

• Hospitality industry: Several labor rights initiatives are starting to take shape to tackle modern slavery and forced labor in the hospitality industry. The International Tourism Partnership’s (ITP) Principles on Forced Labour brings the world’s leading hotel groups together to tackle the three most problematic yet common employment practices that can lead to forced labor, especially amongst vulnerable workers: unlawful retention of passport and valuable possessions, recruitment fees and being indebted or coerced to work. The Shiva Foundation’s Stop Slavery Blueprint is a toolkit intended to address risk of modern slavery for the internal use of hotels and other stakeholders in the industry.

• Apparel industry:

  • Fast Retailing and the International Organization for Migration collaborated to analyze Fast Retailing’s supply chain, diagnose high risk practices, enhance the capacity of sustainability staff to respond to human and labor rights challenges and adopt and implement production partner guidelines for fair and ethical recruitment.

  • The American Apparel and Footwear Association, which represents 1000 different apparel brands, partnered with the Fair Labour Association to develop a Commitment on Responsible Recruitment, which was enhanced and relaunched in 2023.

Alternative models generally involve avoiding third party labor providers in circumstances of higher risk, in favor of direct employment relationships, to ensure greater visibility and control over hiring practices and working conditions.

• In response to reports of forced labor linked to migrant recruitment practices in the electronics industry supply chain in Malaysia, HP released its Foreign Migrant Worker Standard in 2014. The standard goes beyond general industry practice in addressing forced labor – which primarily focuses on implementing policies banning recruitment fees – to require that the company’s suppliers directly employ any foreign migrant workers in their workforce. To help reinforce implementation, HP partnered with Verité to develop supplier guidance on transitioning to direct employment and ethical recruitment practices. See Shift’s analysis here.

• One example of producer-led practices aimed at tackling forced labor in the form of Sumangali schemes in Southern India, is Penguin Apparel’s Program. The garment manufacturer has eliminated labor brokers and recruitment fees from its hiring processes, ensures local language translation of employment documents, provides training to workers on their rights, conducts audits of its own suppliers and contractors in the search for Sumangali schemes and educates its partners on social management systems. See Shift’s analysis here.

• Unilever’s Joint Commitment on Sustainable Employment, signed in 2019 with IndustriALL and the IUF, restricts temporary contracts, bans zero hour contracts, ensures equal pay for equal work, and protects union rights across 300+ factories in 69 countries. It aims to strengthen job security and fair conditions for both direct and agency workers. In May 2025, while the agreement itself remained unchanged, Unilever guaranteed existing pay, benefits, and conditions for 6,000 European ice cream workers for three years following a planned corporate restructuring — exceeding the legal one-year requirement.

• Know the Chain & Business and Human Rights Resource Centre (2024) Good Practice Guide: Supply chain human rights due diligence.

• Responsible Recruitment Gateway.

• Responsible Labor Initiative of the Responsible Labor Alliance.

• Vérité: Fair Hiring Tool.

• SOMO, Temporary agency work in the electronics sector: Discriminatory practices against agency workers (2012).

• Business and Human Rights Resource Center, Inhospitable: How hotels in Qatar & the UAE are failing migrant workers (2019).

• Business and Human Rights Resource Centre (2024) Rush to renewables: Toward migrant worker rights and a just energy transition in the Gulf.

• Ethical Trading Initiative (2023) Tackling exploitation of migrant workers in Agriculture.

• Oxfam International (2024) Essential but Invisible and Exploited: A literature review of migrant workers’ experiences in European agriculture.

• ILO (2024) Ensuring safety and health at work in a changing climate.

• Interfaith Center on Corporate Responsibility (2017) Best Practice Guidance on Ethical Recruitment of Migrant Workers

• Dhaka Principles for Migration with Dignity.

• International Labour Organization, Regulating International Labour Recruitment in the Domestic Work Sector: A Review of key issues, challenges and opportunities (2016).

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

Gig economy

The gig economy is growing rapidly but defining and measuring gig work can be challenging. According to the World Bank Group, in 2023 between 145 million and 435 million individuals worldwide were engaged in the gig economy, which represents between 4% and 12% of the global workforce, and with considerable growth anticipated, particularly in developing countries.

Classifying an employee as an independent contractor can reduce costs to the company, such as payroll taxes and premiums for workers’ compensation – by as much as 30%. 

Further, non-traditional employment – such as gig work – has the potential to provide some benefits for some workers, such as independence and flexibility in choosing where, when and for whom they work. However, such benefits are not always realized. For example, gig workers can be committed to one employer through variable hour contracts, which significantly decreases their flexibility and increases uncertainty. Where these non-traditional employment relationships are exploited, it can exacerbate existing vulnerabilities by shifting costs and risk to workers (without commensurate increase in financial compensation).

Some groups have referred to excessive use of such employment relationships as a “misclassification business model”, whereby the company “engages the people who actually carry out the core business, and over whose work significant control is exerted, as independent contractors instead of employees”.

Further, in geographies without regulatory protections for workers, this structure can deny workers access to the benefits that are tied by domestic law to a direct employment relationship, including:

• Access to anti-harassment and discrimination protections (Right to non-discrimination; Right to just and favorable conditions of work).

• Minimum wage and overtime protections (Right to equal pay for equal work; Right to fair/living wage).

• Safe working conditions (Right to health and Right to life)

• Right to organize and bargain collectively (Freedom of association)

• Access to unemployment insurance and workers’ compensation (Right to an adequate standard of living; Right to just and favorable conditions of work).

Internships

When used appropriately, internships can provide a valuable entry or insight into a company or industry. When used inappropriately, they can amount to individuals undertaking “real work of real value with no economic support”. Where independent contractors or interns undertake jobs similar to regular workers in an organization, but for less pay or access to benefits, issues of equal pay and non-discrimination arise. Moreover, internships that are unpaid can limit access to opportunity for those, including in the global South, who do not have the financial resources to work for free, reinforcing persistent economic and social inequalities (See PSI).

The gig economy’s business model, built on flexible, on-demand labor, can leave workers particularly exposed to the escalating risks of climate change. Gig workers, especially those responsible for ride-hailing and delivery services, are increasingly required to work through heatwaves, storms, and poor air quality, often without access to sick leave, workers’ compensation, or protective equipment. At the same time, the high volume of short, on-demand trips and deliveries can contribute to urban congestion and air emissions, thereby potentially exacerbating the precarious working conditions.

Regulatory, financial and legal risks:

• In Canada, the Ontario Labour Relations Board ruled in 2020 that foodora couriers are dependent contractors, giving them the legal right to organize and join a trade union.

• In 2024 the US Department of Labor instituted a new rule that made it more difficult for companies to classify workers as independent contractors, thus potentially bolstering legal protections and compensation for workers and potentially increasing company insurance liabilities.

• In July 2024, the California Supreme Court upheld Prop 22, a new hybrid scheme that, while allowing Uber, Lyft, and DoorDash to keep drivers as contractors, guarantees 120% minimum wage, health care stipends, and some injury protections.

• In the UK, court cases are reclassifying gig economy workers. In February 2021, the UK Supreme Court unanimously ruled that Uber drivers are “workers”, not independent contractors. Thereafter in November 2024, a UK Employment Tribunal ruled that European ride-hailing group Bolt’s UK drivers must be classified as “workers” rather than independent contractors, entitling them to rights such as the national minimum wage (including for time logged into the app), paid annual leave, and potentially over £200 million in back pay for around 15,000 claimants. The tribunal found that Bolt exercised significant control over drivers, rejecting arguments that they operated as independent businesses. While Bolt had introduced certain benefits in mid-2024 (such as holiday pay and pensions) without reclassifying drivers, it is now reviewing the judgment and considering an appeal. The Bolt ruling closely mirrors the landmark Uber v Aslam case, the outcome of which held that Uber drivers were “workers” and were therefore entitled to the benefits attached to that status. These cases may have far-reaching implications for the gig economy in the UK.

• Denver Labor, the US city of Denver’s labor enforcement office, issued citations to two businesses – Instawork and Gigpro – seeking over USD 1 million in restitution and fines because they misclassified their workers as independent contractors, resulting in hundreds of workers being paid less than minimum wage and being denied the right to paid sick leave.

• In 2023, the San Francisco City Attorney filed a lawsuit against Qwick, an on-demand hospitality staffing company, for “illegally misclassifying its workers and denying them guaranteed protections wages and benefits”. The City Attorney stated “Qwick is inequality disguised as innovation, a staffing company with an app that is in flagrant violation of labor and employment laws. It uses convenience and flexibility to mask its decision to deny workers their rights.” In 2024, Qwick agreed to a USD2.5 million settlement with the City of San Francisco.

• The EU Platform Work Directive, which Member States are required to transpose into national law by December 2, 2026, aims to enhance rights for gig economy workers by establishing a legal presumption of employment for platform workers under certain conditions, thereby granting them access to benefits like minimum wage and paid leave. It mandates transparency in algorithmic management, requiring platforms to disclose how automated systems affect working conditions and to provide human oversight over significant decisions.

• The legality of unpaid internships remains in a grey zone, with conflicting case law and a number of lawsuits filed by interns asserting they undertook the work of employees, for free.

Financial risks

• In April 2020 the FT noted that Jim Chanos, the US investor, had warned in March that “he was shorting the stock of companies that relied on ‘gig workers’, on the basis that the crisis would change social and political attitudes to businesses relying on this precarious workforce”.

Staff recruitment/ Retention risks and Reputational Risks

• Organizations that rely heavily on unpaid or temporary labor, especially where it replaces entry-level jobs, face risks associated with lack of retention of staff with progressively increasing knowledge/skills. Further, they may miss opportunities associated with a more diverse workforce (age, family responsibilities, socio-economic status) by only drawing on a pool of talent with the means to remain unpaid for the period of work.

• Reputational risks may arise where workers mobilize to highlight their concerns about working conditions. For example in India, a country that hosts one of the fastest growing gig economies, there was a four day protest in Hyderabad, during which workers emphasized that the online grocery delivery service Zepto had not responded to workers’ concerns about lack of employee protections, including health insurance and accident coverage. The national gig workers union group also submitted a complaint to the state Labor Department highlighting alleged exploitative labor practices by the company.

Business Opportunity Risks:

• In response to Spain’s 2021 “Rider Law”—which requires app-based delivery companies to classify riders as employees— British online food delivery company Deliveroo announced its withdrawal from the Spanish market and officially ceased operations there on 29 November 2021.

Where a company routinely offers poorer pay and conditions to workers of a particular employment status, especially where this intersects with ethnicity or immigration status, age or other factors, they risk causing a negative impact.

Where a company’s remuneration of contract workers (or the hours of work it makes available to them) renders it difficult for a worker to maintain a living wage as they juggle multiple jobs, their health and safety is compromised on the job, or they have no freedom of association, they risk contributing to an impact.

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

• 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 [emphasis added].

• SDG10 Reduced Inequalities, in particular target 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality

• SDG14 Climate Action, in particular target 14.1: Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries.

• Does the company or its supply chain partner(s) use substantial numbers of non-employed workers (e.g. gig workers, contract workers)?

• Does the company have clear guidance to managers on the appropriate use of non-employed workers?

• How does the company engage with workers on working hours? Are workers guaranteed a certain number of hours, do they have a regular schedule, or do they have input into the hours they work?

• Do contract workers have the same protections under the law and regulations as the company’s own employees? Consider

  • Access to anti-harassment and discrimination protections

  • Minimum wage and overtime protections

  • Access to unemployment insurance and workers’ compensation

• If not, does the company apply its policies to contract workers in order to bridge this gap?

• How does the company know if non-employed workers associated with the organization are vulnerable to extreme weather, such as heat waves? What measures does the company have in place to address these types of impacts?

• Do contract workers have the same opportunities to organize as the company’s own employees?

• Does the company or a supplier have a deliberate strategy to use contract laborers in order to limit union organization?

• Does the company use paid or unpaid interns?

• Can the primary beneficiary of the internship be considered to be the intern? Or is it rather the company?

• Are interns undertaking similar work to paid employees?

• Since 2015 Microsoft has required that its vendors provide contract employees with at least 15 days of paid holiday and sick leave and since 2018, paid family leave.

• In India, Swiggy and Zomato (two food delivery services), have taken steps to address the extreme heat to which their workers are increasingly exposed and which is increasingly compromising worker health, as well as the service delivery times. For example, Swiggy has set up 900 “recharge zones” and Zomato has 450 “rest points” where food delivery workers can rest, use the washrooms, and drink water.

• getTOD, a South African platform for tradespeople such as electricians and plumbers, has gained recognition for its commitment to fair labor practices, including by ensuring workers earn at least a living wage, have clear and transparent contracts, and are assured freedom of association.

• We Pay Our Interns is an organization of NGOs in Geneva who “joined forces on the common understanding that promoting human rights worldwide must first be applied to basic human rights in their own structures” and committed to promoting a basic pay (stipend) for their interns.

• A “groundbreaking” 2019 agreement between Hermes Parcelnet (now Evri) and the GMB union was notable as the UK’s first deal offering gig economy couriers a new “Self-Employed Plus” (SE+) status, combining self-employment flexibility with guaranteed pay, holiday entitlement, and union representation. It set a precedent for improving worker protections without fully reclassifying gig workers as employees. Building on this, Hermes introduced pension auto-enrollment for SE+ couriers by the end of 2022 and added maternity and paternity leave benefits starting March 2022. In March 2021, the company also raised courier pay rates and introduced additional service incentives.

• Some transformations have occurred as a result of legal pressure. For example in Spain, following fines amounting to €205 million for using a false self-employment structure, delivery company Glovo officially announced that all 20,000 of its riders in Spain will transition to employee status from July 1, 2025, abandoning the self-employed model entirely.

On gig workers

• Fairwork is a website that articulates fair work principles, rates and ranks the working conditions of digital platforms, and produces publications on types and locations of gig work.

• Human Rights Watch (2025), “The Gig Trap”. This report explores how major digital labor platforms in the U.S. misclassify gig workers as independent contractors, thereby denying them essential labor rights.

• World Bank Group (2023) Working Without Boarders: The Promise and Peril of Online Gig Work

• ILO (2024) Expansion of the Gig and Platform Economy in India: Opportunities for Employer and Business Member Organizations

• Business and Human Rights Resource Centre’s Gig Economy Portal

• Business and Human Rights Resource Centre (2019), “The Future of Work: Litigating Labour Relationships in the Gig Economy”, Corporate Legal Accountability Annual Briefing 2019: Briefing focuses on the “misclassification of workers as “independent contractors” in the gig economy – and the resulting erosion of labour rights”.

• Gig Workers Collective (a non-profit organization of gig worker activists)

• Prosus (2024) Livelihoods in a Digital World: A brief for good work in the digital economy

On gig workers and climate change

• Lu, S et al. (2024) “When Gig Work Meets Extreme Weather”, Harvard Business Review.

• Vu, A.N. and D.L. Nguyen (2024) “The gig economy: The precariat in a climate precarious world” World Development Perspectives, Vol. 34.

• TGPWU & Heatwatch (2024), Impact of Extreme Heat on Gig Workers: A Survey Report details the heat-related issues facing Hyderabad’s gig workers as well as proposed recommendations for addressing these issues.

On internships

• Fair Internship Initiative

On contract workers

• Shift/Mondiaal’s “Respecting Trade Union Rights in Global Value Chains: Practical Approaches for Business” (2019) contains diagnostic questions on outsourcing and contract Labor.

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