Offering products that harm when used as intended.
For Example
Manufacturing and selling tobacco products, whose intended use causes cancer, cardiovascular disease, and respiratory illness
Developing autonomous weapons systems designed to select and engage targets without meaningful human oversight, and thus are inherently incapable of complying with core principles of international humanitarian law, such as distinguishing combatants from civilians, proportionality, and a context-sensitive assessment
Producing cluster munitions or anti-personnel landmines, whose wide-area, indiscriminate effect on civilian populations has led to their prohibition under international law
The business’s commercial success substantially depends upon offering lowest cost goods or services such that it becomes economically challenging for the company or suppliers to respect labor rights.
FOR EXAMPLE
Selling apparel and other consumer goods premised on cheapest prices for customers, such that increases in production costs are absorbed through the wages of already low-paid workers
Locating (and relocating) production to countries with lowest wages
HIGHER-RISK SECTORS
Commerce sector, in particular “value brand” retail companies, including apparel retail
The Shift CSDDD Explainer Series offers practical guidance for companies on meeting the requirements of the EU Corporate Sustainability Due Diligence Directive (CSDDD) in line with their responsibilities under the UN Guiding Principles on Business and Human Rights (UNGPs).
The CSDDD requires businesses to identify actual and potential human rights and environmental harms connected to their own operations, the operations of subsidiaries and those of business partners within their “chain of activities”.
EU and non-EU headquartered companies that are covered by the CSDDD must comply with the legislation by July 2029. Smaller companies that are business partners of companies that are in scope will also be impacted.
Starting with Identification and Prioritization, each explainer focuses on a key aspect of effective CSDDD implementation. It is not a complete set of guidance that covers every issue or scenario. Instead, each explainer focuses on what matters most in practice: key areas of interpretation, practical tips and common pitfalls to avoid.
Informed by Shift’s engagement throughout the legislative process and more than 15 years of experience helping companies and other stakeholders implement the UNGPs, the series aims to help companies build due diligence processes that are compliant with the CSDDD, effective in delivering better outcomes for people and the environment, and supporting sustainability reporting under the CSRD.
Effective implementation of the CSDDD also provides a strong foundation for meeting EU sustainability reporting requirements under the Corporate Sustainability Reporting Directive (CSRD). While the CSDDD sets out what companies should do to identify and address their impacts on people and the environment, the CSRD requires transparent reporting about this process. In short, due diligence and reporting are two sides of the same coin. Companies can save time and resources and enhance positive outcomes when they create a single coherent process to meet both sets of expectations.
Explainer 1: Identification and Prioritization
This first explainer in the series examines how companies should identify and prioritize impacts on people and the environment as part of their sustainability due diligence process. It provides practical guidance on one of the most important foundations of effective CSDDD implementation.
Companies are increasingly aware that their impacts and dependencies on nature are closely connected to impacts on people, particularly Indigenous Peoples and local communities. For instance, land used for agriculture, mining, and infrastructure development can mean that communities are displaced from their homes or livelihoods, or intensive water use by companies can reduce the quality and availability of water for local people.
Companies that meaningfully engage with Indigenous Peoples and local communities are better able to identify and respond to these potential negative impacts. Where the quality of community engagement is poor, and concerns are not effectively addressed, they can escalate into community opposition with a range of financial effects from:
Operational disruption and delays
Project redesign, suspension or abandonment
Legal and regulatory intervention
Reputational damage and loss of market access
Increased costs of capital
Diversion of management time and resources
These effects are often substantial and costs can run into the millions or billions of dollars. At the same time, they are frequently underestimated because they are dispersed across different parts of the business or simply not measured at all.
Shift has published a report which shows the quality of a company’s engagement with Indigenous Peoples and local communities in relation to nature-related impacts is financially material. It is published as the International Sustainability Standards Board (ISSB)’s considers whether companies should disclose information about their engagement with Indigenous Peoples and local communities in relation to nature-related risks and opportunities.
The report is based on a broad evidence base, including:
A review of over 40 academic and technical studies
A database of more than 1200 cases of company-community interaction related to nature-related impacts
Over 800 cases where financial effects were identified
Detailed case studies across sectors and geographies where the presence, absence, or quality of community engagement had a financial effect – either positive or negative – on the company
The evidence review found that the quality of community engagement helps determine whether nature-related dependencies or impacts become sources of trust and collaboration or of opposition and loss. Therefore information on the quality of company-community engagement is financially material, and decision-useful for investors and others.
The report has been published alongside a compendium of 24 case studies that detail how companies across different sectors and geographies have approached community engagement and the financial effects they have experienced. Case studies are divided into three categories:
Value creation: where high-quality engagement contributes directly to financial value, for instance where partnership with communities strengthens supply chain resilience , operational stability or enables market access.
Value protection: where engagement protects project value, for instance through reducing permit delay, supporting investor confidence and access to capital.
Value erosion: where failures of engagement have led to project cancellation, stranded assets, cost overruns and delays, loss of buyers and reputational damage.
Many financial institutions (FIs) struggle to define what good social performance looks like in practice.
Building on our recent work with banks, insurers and investors, Shift has published a report on Social Performance Measurement: Practical Insights and Tips for Financial Institutions. The paper sets out what works — and what doesn’t — when building insightful, decision-useful approaches to measurement.
We offer eight practical tips for moving beyond measuring basic inputs and activities (e.g., “number of human rights assessments completed”, “number of trainings delivered”) toward indicators that capture changes in business practice and behavior, as well as outcomes for people. These tips are organised around the three dimensions that FIs need to measure:
their own efforts to embed human rights due diligence
the performance of clients and investees; and
progress on specific high-priority human rights issues (such as living wage or land rights)
Along the way, it addresses key challenges and misperceptions that can often hold this work back.
The resource is written for practitioners inside financial institutions – sustainability and human rights leads, due diligence program owners, risk officers, and investment and credit professionals – looking to build, refine, or defend a credible measurement approach in an environment where demonstrating ‘what good looks like’ is of increasingly value and importance.
It will be equally useful to those who hold financial institutions to account on their human rights performance – civil society organizations, benchmark managers, regulators, auditors and asset owners – by reinforcing a shared language and a sharper set of questions for engaging the institutions they monitor.
If you are keen to take stock of where your approach sits today, and to better understand where it could go next, we invite you to take a closer look.
Today’s financial institutions (FIs) are operating in a global geopolitical context marked by multiplying conflicts, shifting political alignments and a decline in respect for international law. Moreover, technological developments are redefining the methods of conflict.
In this environment, FIs face growing pressure from governments to navigate defense-related clients and transactions in ways that support evolving security priorities. They also have strong commercial incentives to participate in a rapidly expanding sector.
At the same time, institutions remain bound by longstanding commitments to responsible investment and lending practices. And we continue to see a large body of data showing that conflict -including the impacts on people’s human rights arising from conflict -creates business and investment risks for financial institutions.
Importantly, in a turbulent geopolitical context, institutions that adapt their policies and decisions in response to one particular conflict can quickly find themselves applying those policies to very different conflict situations, where alliances, actors and the justifications for the use of force are far less settled.
Against this dynamic backdrop, financial institutions face a practical question: how should human rights due diligence be approached in relation to companies developing, producing, brokering, selling or exporting weapons and dual-use technologies?
Shift has worked for many years with investors and lenders to help them understand and address human rights risks across their portfolios, with a growing focus on conflict-affected and high-risk contexts, particularly since the war in Ukraine. Through this work, we have observed recurring challenges in navigating complex, incentive-laden decisions, and while there are no simple solutions, there are stable anchors that can guide institutions through this rapidly evolving terrain.
This paper
sets out particular challenges faced by practitioners within financial institutions who are tasked with managing human rights risks when it comes to defense-related lending and investing;
sets out some key ‘anchors’ in international humanitarian law that set important parameters on decision-making by financial institutions; and
discusses additional approaches that financial institutions can take as part of their human rights due diligence to strengthen their decision-making and better manage risk to their clients and to their own institutions.
Action to address climate change is urgent and essential for our shared future. This action should shape better lives for all, not leave the poorest and most marginalized left out and worse off.
We already see the consequences of today’s high levels of inequality all around us in social polarization, political backlash, economic protectionism and instability. Climate action that fuels these dynamics will only increase opposition to the kinds of changes we need to build a more sustainable future.
Instead, we need to achieve what is termed a ‘just transition’ – a transition to a low carbon and climate-resilient future that prevents or minimizes harm to vulnerable workers, communities and consumers.
Companies, standard setters and financial institutions increasingly recognize the need to bring a human rights perspective to climate action in service of a just transition. And standard-setters are already reflecting these expectations in the laws, regulations and other standards they develop.
We see more and more organizations using narrative – or ‘qualitative’ – indicators to describe how human rights considerations are integrated into companies’ efforts to mitigate and adapt to climate change. But we are also hearing an increasing number of organizations call for quantitative, measurable data, to complement these qualitative indicators, to provide a more comprehensive and tangible picture of how impacts on people from climate action are being managed.
As a result, it is clear that quantitative metrics are also needed to measure what is working and what isn’t, to know which are the successful approaches that should be scaled and replicated, and to be able to account for the results.
Shift has been working with a number of other organizations doing leading work in support of a just transition, to build broad consensus around a core set of quantitative, sector-agnostic metrics. Shift collaborated with Business and Human Rights Centre, Business for Social Responsibility, Council for Inclusive Capitalism, LSE’s Just Transition Finance Lab, World Benchmarking Alliance and World Business Council for Sustainable Development (WBCSD) to create metrics that can help provide to assess the ‘justness’ of the climate transition
This set of metrics does not – because it cannot – address all scenarios and variations. However, we believe they provide a sound foundation upon which additional metrics relevant to specific sectors and geographical contexts can be layered.
Throughout the development of the metrics, Shift and our collaborating partners have intentionally kept them within the realm of data that can reasonably be gathered and provided by companies, while recognizing – and hoping – that the art of the possible will improve over time.
The intent is that these metrics can be applied in the context of full ‘transition plans’ or in relation to more diffuse activities targeted at the transition. In either case, the metrics would apply within the same ‘boundaries’ – in terms of facilities, locations or other fields of action – as those plans and activities and their associated climate metrics.
The final set of just transition metrics should be one that can be embedded in sustainability reporting standards alongside important contextual information. Figure 1 illustrates how they might fit into the four-pillar structure that is common to many reporting standards today.
Figure 1
GOVERNANCE
– High-level oversight of policy/strategy/transition planning – Human Rights Due Diligence process linked to transition planning and implementation – Approval of targets
STRATEGY
– Commitments to Just Transition, decent jobs, social dialogue – Identification of, and meaningful engagement with, affected stakeholders – Workforce composition
RISK AND IMPACT MANAGEMENT
– Highest risk and impact climate actions and locations -Measures taken to mitigate risksand impacts – Process for identifying and addressing skills gaps and opportunities
METRICS & TARGETS
– Job security – Reskilling, upskilling and redeployment – Remuneration & living wage – Engagement with workers and communities
This version of the metrics builds on our experience working with the Global Reporting Initiative, which has made ground-breaking progress as part of GRI 102: Climate Change Standard, as well as an earlier set of metrics we published in April 2025. This most recent version reflects collaboration and consensus across a range of organizations around the current “best-in-class” metrics.
It is our hope that these metrics bring clarity and value to all stakeholders: companies themselves as they try to measure what matters; data providers and investors who need this information for their own services and decisions; and reporting standard-setters needing to ensure consistency for preparers and insight for users of disclosed information.
We will continue conversations with interested organizations in the months ahead, including to learn more about the use of these metrics in practice, and how they can be further improved and added to in light of experience and further data availability. We welcome all inputs and advice as part of this continuing exploration.
Click here to download an Excel spreadsheet containing our Just Transition Metrics.
About the EU Corporate Sustainability Due Diligence Directive
Beginning in 2017, several European states including France, Germany and the Netherlands began to adopt versions of mandatory human rights due diligence legislation. This created momentum for the European Union (EU) to help level the playing field, recognising that voluntary corporate action alone is not sufficient to drive change in how people are treated in global value chains at the scale and pace that is needed.
In 2022, the EU began negotiating a draft Corporate Sustainability Due Diligence Directive (CSDDD) which was finally adopted in May 2024. Throughout the two years of negotiations, Shift was focused on engaging with policy-makers in EU Member States and in the European Parliament to help ensure the CSDDD was anchored in the international standards on sustainability due diligence – the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. Many other stakeholders also supported this call, including thousands of companies. Despite limitations with regard to the scope of companies covered under the Directive, and limited obligations with regard to due diligence on downstream business relationships, the core content of the final law was substantially aligned with the UNGPs.
Shortly after the CSDDD was enacted, the President of the European Commission announced that the Commission would bring forward a proposal to simplify requirements and reduce burdens on European companies, including in relation to the CSDDD (which had not yet even entered into force for covered companies) and the more established Corporate Sustainability Reporting Directive (CSRD). In February 2025, the Commission announced its ‘Omnibus Simplification Package I’ (‘Omnibus’). While the goals of the Omnibus were broadly reasonable ones for EU policy-makers to pursue, in fact the proposal would have made life more complicated for covered companies by requiring them to carry out parallel due diligence processes without providing meaningful protections for smaller business partners – as we explained in our March 2025 assessment of the Omnibus Proposal.
Alongside individual companies and business associations that support the UNGPs, and our civil society allies, Shift was actively involved throughout the Omnibus process to push for continued alignment with the international due diligence standards.
Where did the final CSDDD land?
In December 2025, a political agreement was reached that preserved the core of the risk-based due diligence approach in the CSDDD, as we explained in our assessment of the result. The revisions to the CSDDD were confirmed by the European Parliament and by Member States in the Council of the EU in February 2026.
The final CSDDD sets a mandatory regional standard that will have an impact not only in Europe but well beyond. Although the scope of companies covered by the Directive following the Omnibus process was reduced to only the very largest companies operating in the EU, the impact of the legislation will extend significantly beyond those companies and into their global value chains.
Crucially, the due diligence duty in the CSDDD remains substantially aligned with the international due diligence standards, making it more likely to be impactful in practice for workers and communities while remaining feasible for companies to implement. The CSDDD thus helps level the playing field for companies that have been implementing the international standards for 15 years.
EU Member States now have to transpose the CSDDD into their national laws by mid-2028 and enforcement will start from mid-2029. Meanwhile the European Commission is mandated to develop authoritative guidance on the due diligence duty that will influence enforcement by national regulators and through civil litigation.
Throughout the uncertainties created by the Omnibus process, and now as EU Member States prepare to implement the CSDDD, our advice to companies that want to know how they should respond remains the same – keep doing risk-based due diligence in line with the UNGPs. That remains the single best investment companies can make to prepare to meet current and future legislative and wider demands, whether from investors, lenders, customers, civil society or EU policy-makers. That is particularly true as other jurisdictions – including Switzerland, the UK, Australia, Thailand and Indonesia – now move to advance or debate proposals on mandatory human rights due diligence grounded in the UNGPs.
Core Resources
Our analysis
4 resources
December 2025
Shift statement on the political agreement on the Omnibus Simplification Package on EU sustainability due diligence and reporting rules
December 10, 2025 _____ On Monday, 8 December, EU Member States and the European Parliament reached a provisional political agreement in trilogue negotiations – together with the European Commission – on the Omnibus I process to revise both the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD). The rushed and […]
The European Commission’s ‘Omnibus Simplification Proposal’: Shift’s initial reflections
06 March 2025 The European Commission has launched its Omnibus Simplification Proposal to address concerns about sustainability regulations in the EU. But measured by its own objectives of simplifying requirements and reducing burdens on smaller companies, the proposals are a remarkable own goal. Negotiations in the coming months must be grounded in a practical grasp […]
Designing an EU Due Diligence Duty that Delivers Better Outcomes
What is the CS3D? Starting in 2022, the European Union has been negotiating a draft Directive on Corporate Sustainability Due Diligence (CS3D), with discussions on a final law expected to begin by mid-2023. The draft Directive aims to ensure companies active in the single European market contribute to sustainable development by preventing and addressing negative human rights and environmental impacts. […]
Aligning the EU Due Diligence Directive with the International Standards: Key Issues in the Negotiations
Aligning the CS3D with the core concepts in the international standards The EU is currently in the process of negotiating a legal instrument that will establish new corporate human rights and environmental due diligence duties across the single market – the draft Corporate Sustainability Due Diligence Directive (CS3D). At the heart of the negotiations is […]
Our March 2022 ANALYSIS of the Commission’s proposal for a draft Directive
Our October 2021 Key Design Considerations for the Enforcement of Mandatory Due Diligence, developed in collaboration with the Office of the UN High Commissioner for Human Rights
This series captures the research findings from our analysis of 3073 social and governance indicators used in ESG data providers’ products or reporting requirements.[1] In our Guardrails, we focus first on the problems, spotlighting the types of indicators that offer minimal insight, or worse, incentivize poor practices. In our Guidelines, we then turn to indicators and metrics that are more robust, illuminating the pathway to better measurement. In our Thematic Deep Dives, we review ESG indicators related to specific issues (Occupational Health and Safety, Living Wage, Community-Focused Impacts). These deep dives identify pitfalls in indicator formulation as well as good practices that can inform better measurement of companies’ social performance on these topics.
Across the series, we will exemplify the good, bad and ugly of social indicators and metrics. Our goal is not to offer yet another set of competing indicators, but to share what we’ve learned about good indicator design in order to inform healthy debate, collaboration and innovation to improve the S in ESG.
This series is for everyone and anyone working to improve the ways in which we evaluate companies’ social performance.
Deep Dive Series
A series of deep dives evaluating better social indicators and metrics for occupational health and safety, living wage, and community-focused impacts.
3 resources
DEEP DIVE 01: Occupational Health and Safety Indicators
In climbing, guidelines are cords or ropes to aid passers over a difficult point or to permit retracing a course. Guardrails are physical barriers used to prevent people from falling from a height or from straying from a pathway or road into dangerous areas. So, both are put in place when the journey and terrain may be hard to navigate.
In the context of designing social indicators and metrics, we need both guardrails and guidelines, so we’ve structured our initial findings within the series around these.
If we fail to reclaim the measurement of companies’ social performance as a tool to advance business respect for human rights, the S in ESG will remain divorced from the investor and business decisions that determine whether business is done with respect for people’s dignity. We hope this series can play a part in sustaining, advancing and scaling practices that lead to better outcomes for workers, communities and the people impacted by the use of products and services.
Guardrails
A series of guardrails for designing better social indicators and metrics.
3 resources
May 2024
Guardrail 01: Avoid indicators that create perverse behavioral consequences.
The field of sustainability and responsible business conduct is faced with a significant opportunity: to coalesce around a core set of select, standardized indicators and metrics that meaningfully measure companies’ social performance regardless of their industry sector. This is key to equipping investors, business leaders, regulators and civil society with the tools to push to scale business practices that are in line with the principle of basic dignity and equality for all.
Success will significantly contribute to tackling inequalities, ensuring business actions towards net zero and net positive have the social license to proceed at the urgent pace required, and adapting business models and global value chains so that they deliver resilience to businesses and the stakeholders they impact. Failure risks ushering in more, already well-catalogued business-related harms and risks to people, planet and prosperity, likely with evermore multi-generational consequences.
The good news is that most stakeholders have embraced the pressing need for convergence around corporate sustainability reporting standards, including the indicators and metrics against which companies should disclose information and that should be used to evaluate corporate performance. Even better, recent institutional coordination and collaboration has set the stage for well-governed and inclusive processes needed to achieve such convergence.
Barriers to strengthening the S in ESG
Any ambitious project has risks that need managing. The challenge of building consensus across diverse stakeholders around indicators and metrics that offer credible insight into a company’s social performance is no exception.
Some risks are the consequence of positive dynamics. For example, the welcome growing attention to the S in ESG has resulted in thousands of social indicators and metrics already being developed by mainstream data providers and more targeted ranking and rankings. But the risks is that in a bid to identify a smaller set of indicators, we select the most commonly used indicators, in spite of broad recognition that these may not be fit for purpose.
In addition, the urgent need to effect a step change in the scale and quality of corporate reporting and assessment on social issues also carries the risk that project timelines prevent us from interrogating the devil in the detail of indicator formulations, such as when indicators may have perverse, unintended consequences.
The consequence of such risks is more than inconvenience and frustration. We could end up with solutions that confuse decision-makers, reflect the lowest common denominator of thinking and practice, or fail to ward off critiques of blue-washing and corporate capture, but also of so-called woke capitalism.
[1] Shift was unable to verify whether the non-public indicators and metrics that we used for our analysis are the most up to date versions used by data providers at the time of writing (April 2024). We also recognize that the underlying methodologies used to reach a judgement on a company’s performance against an indicator may offer more nuance that we could not access for our research.
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Business Model Red Flags 
Leadership, Governance, & Culture 
Tool for Indicator Design 
Quality of Relationships 
