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Building Consensus Around Just Transition metrics

Action to address climate change is urgent and essential for our shared future.

This action should shape better lives for all, not leave the poorest and most marginalized left out and worse off. We already see the consequences of today’s high levels of inequality all around us in social polarization, political backlash, economic protectionism and instability. Climate action that fuels these dynamics will only increase opposition to the kinds of changes we need to make to build a more sustainable future. Instead, we need to achieve what is termed a ‘just transition’ – a transition to a low carbon and climate-resilient future that minimizes harm to vulnerable workers, communities and consumers.

Companies, standard setters and financial institutions increasingly recognize the need to bring a human rights perspective to climate action in service of a just transition. And standard-setters are already reflecting these expectations in the laws, regulations and other standards they develop. We see more and more organizations using narrative – or ‘qualitative’ – indicators to describe how human rights considerations are integrated into companies’ efforts to mitigate and adapt to climate change. However, descriptions alone will not enable companies and others to know just how successful these efforts are in practice. We are missing the quantitative metrics that are also needed to measure what is working and what isn’t, to know which are the successful approaches that should be scaled and replicated, and to be able to account for the results. 

Shift has been exploring the opportunity to build broad consensus around a core set of quantitative, sector-agnostic metrics that can supplement qualitative indicators and help provide the full picture necessary to assess the ‘justness’ of the climate transition. 

We aim to keep this a simple set of sector-agnostic metrics that does not – because it cannot – address all issues and variations. We hope that they can then be built on further in the future to meet the specific circumstances and needs of different sectors, with their differing roles in achieving a just transition, and the differing local contexts in which they operate. 

We will also need to keep these initial metrics within the realm of data that can reasonably be gathered and provided by companies, while recognizing – and hoping – that the art of the possible will improve over time. They should be capable of being applied in the context of full ‘transition plans’ or in relation to more diffuse activities targeted at the transition. In either case, the metrics would apply within the same ‘boundaries’ – in terms of facilities, locations or other fields of action – as those plans and activities and their associated climate metrics.

The final set of just transition metrics should be one that can be embedded in sustainability reporting standards alongside important contextual information. 

Figure 1 demonstrates how they might fit into the four-pillar structure that is common to many reporting standards today.

Figure 1


GOVERNANCE

– High-level oversight of policy/strategy/transition planning
– Human Rights Due Diligence process linked to transition planning and implementation 
– Approval of targets
STRATEGY

– Just transition commitment
– Decent jobs commitment 
– Social dialogue commitment 
– Identification of and meaningful engagement with affected stakeholders 
– Workforce composition
RISK AND IMPACT MANAGEMENT

– Highest risk climate actions and locations
– Measures taken to mitigate risks
– Process for identifying and addressing skills gaps and opportunities 		METRICS & TARGETS (this is our focus)

– Job security Reskilling, upskilling and redeployment
– Remuneration & living wage
– Engagement with workers and communities

We are sharing here an early draft – a work in progress – of a potential set of such metrics. They build on our experience working with the Global Reporting Initiative, which has made ground-breaking progress on just transition metrics as part of its 2025 revision of its Climate Change reporting standard. They also reflect inputs and suggestions from various organizations and ‘just transition’ experts. We are grateful to all those who have provided their insights to date. 

We plan to continue and expand these conversations in the months ahead, as we know there is much that remains to be improved. Achieving a broad consensus around the current best-in-class metrics should bring clarity and value to all stakeholders: companies themselves as they try to measure what matters; data providers and investors who need this information for their own services and decisions; and reporting standard-setters needing to ensure consistency for preparers and insight for users of disclosed information.

We look forward to engaging with organizations interested in providing expertise and feedback to this effort, including organizations from the Global South. We welcome all inputs and advice as part of this continuing collaboration. 

Understanding Impact Materiality: ESRS Reporting for Financial Institutions

This publication draws on Shift’s involvement in drafting the European Sustainability Reporting Standards, our expertise in the UNGPs, and our advisory work and research on banks’ approach to double materiality assessments (DMA). Although this publication refers to banks, the content also applies to other financial institutions who are likely to be connected to severe impacts via their portfolio companies, such as asset managers, asset owners and insurance companies.

Financial institutions and other companies are currently preparing their first reports under the EU’s Corporate Sustainability Reporting Directive (CSRD), based on the European Sustainability Reporting Standards (ESRS). Many banks, however, appear to be incorrectly interpreting and applying the requirements in the ESRS on impact materiality. These misinterpretations would severely undermine the double materiality assessment (DMA), which is the cornerstone of sustainability reporting. The result of flawed DMAs is that banks will fail to report on material human rights impacts that they are involved with via their client relationships.

This resource offers urgent clarifying guidance for banks to ensure that their Double Materiality Assessments adequately meet EU reporting requirements by leveraging the underlying international standards on corporate respect for human rights (the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines).

Business and Human Rights: A Primer for Government Mission Personnel

This Business and Human Rights Primer for Government Mission Personnel is for all Government mission personnel – from diplomats to embassy, mission, and agency staff – whatever their responsibilities, and wherever they work. 

The primer provides an overview of business and human rights and the UN Guiding Principles on Business and Human Rights. Crucially, it includes practical resources to help mission personnel meaningfully engage with the business and human rights issues that arise in the field.

The primer is designed to equip government mission personnel to communicate clear expectations that can help advance business respect for human rights.

Frequently Asked Questions about the EU Corporate Sustainability Due Diligence Directive

In this resource, Rachel Davis (Co-Founder), and Ruben Zandvliet (Deputy Director for Standards), answer companies’ frequently asked questions about the new Corporate Sustainability Due Diligence Directive.

Since the approval of the Corporate Sustainability Due Diligence Directive (CS3D) by senior officials from EU Member States in Council on 15 March, we’ve received numerous questions from companies about where it’s landed and what it means for businesses’ responsibility to respect human rights. With the legislation now weeks away from the finish line, we thought it was a good time to help clear up some of the confusion we’ve been hearing.

This is the first in a series of free, publicly available resources where we’ll be unpacking a few of the common questions – and misconceptions – about the Directive and its relationship with the international due diligence standards, just as we have done for the Corporate Sustainability Reporting Directive. This includes:

  1. What is Human Rights Due Diligence and where does it come from?
  2. Is the CS3D some new kind of ‘European due diligence’? 
  3. Is the CS3D aligned with the international due diligence standards on business and human rights?
  4. What is the role of administrative supervision in the enforcement of the CS3D?
  5. What does civil liability in the CS3D apply to? What does this mean for companies?
  6. What about Member States – what are they required to do?
  7. As a company, what can I do now?
  8. What about impacts in downstream business relationships – are these still covered by legislation?

Whether these are your first steps as a company on the sustainability due diligence road, or you’re well on your way, we hope these resources will help you take the CS3D confidently in your stride.

As a non-profit organization, Shift has been committed to advancing business respect for human rights from the get-go – first in our role helping to draft the UN Guiding Principles on Business and Human Rights (UNGPs), and in the decade since their adoption, embedding them into business practice with companies, financial institutions, civil society organizations and standard-setters around the world. 

Tackling Child Labor: A Guide for Financial Institutions

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In June 2023, following concern from member banks over the persistent scourge of child labor in global value chains and recent reports of the alarming increase in child labor – particularly migrant child labor – in the United States, Shift held a peer-learning session of its Financial Institutions Practitioners Circle on the topic. The session explored how banks and financial institutions can strengthen their efforts to respect children’s rights, particularly in the context of child labor. As a report by UNICEF, Save the Children and the UN Global Compact noted, children are still too often invisible in ESG reporting; and the financial sector can play an important role in changing this. 

This resource is a joint publication by Shift, The Centre for Child Rights and Business and UNICEF. It captures some of the key take-aways from this session, and draws on the experience of the three organizations working with real-economy companies and financial institutions. 

Shift’s Response to the UN Working Group Consultation on Investors, ESG, and Human Rights

In 2016, ESG investing amounted to US$ 22.8 trillion of global assets – by 2025 it’s expected to reach US$ 53 trillion.[1] Yet, while lenders and investors are increasingly using Environmental, Social and Governance (ESG) indicators in their decision-making processes, confusion about metrics persists, particularly when it comes to the ‘S’ in ESG. So, it’s vital that these approaches align with the UN Guiding Principles on Business and Human Rights, which leading financial institutions, states and businesses have been working to implement for over a decade.

In June 2024, the United Nations Working Group on Business and Human Rights will present a report to the UN Human Rights Council on the approaches to ESG taken by financial institutions, including investors, in recognition of their “unparalleled ability to influence companies and scale up on the implementation of the Guiding Principles”.[2] The report will provide guidance for governments, financial actors and others, on aligning ESG approaches with the UN Guiding Principles. As part of this, the group put out a call for input from a variety of stakeholders to inform their recommendations.

This response is Shift’s submission to the consultation, which builds on a decade of experience working with a range of financial actors, including investors, to drive successful implementation of the UN Guiding Principles on Business and Human Rights. For over 10 years, we’ve been supporting financial institutions to identify, assess, and manage the adverse impacts on people associated with their financing activities. In that time, the landscape has changed significantly – marked by new regulatory incentives, increased data availability, and a growing appreciation of the value of robust due diligence processes to financial institutions.

[1] ESG assets may hit $53 trillion by 2025, a third of global AUM, Bloomberg, via OHCHR

[2] P.15, para 77, A/HRC/47/39, Guiding Principles on Business and Human Rights at 10: taking stock of the first decade

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 how to ensure the CS3D is meaningful in driving better human rights and environmental outcomes while also being manageable for companies.

This crucial phase of negotiations is a vital opportunity to align the CS3D with the core concepts in the international standards. The international standards on sustainability due diligence – the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises (OECD Guidelines) – help answer precisely that question, so it’s not surprising that the negotiators’ positions have increasingly built on the core concepts in these standards. Not only have they been shown to work in practice – diverging from them in the CS3D would risk creating a fragmented and confused approach, especially for the many companies that have already been working to implement them.

In this report, Shift takes stock of where progress has been made – and where work still remains – to ensure greater alignment between the positions of the three EU political institutions – the Commission, Council and Parliament – and the international due diligence standards.

Human Rights Defenders and Shrinking Civic Space: A Guide for Financial Institutions

From early warnings to controversy data, investors and lenders are increasingly recognizing their reliance on civil society and human rights defenders for their human rights due diligence (for more see No News is Bad News, the product of a collaboration between ABN AMRO, APG, ING, Robeco, and Morningstar Sustainalytics). This includes the essential insights they provide on salient human rights issues that are material impacts in client portfolios (e.g. for CSRD) include those impacts on people related to climate change and biodiversity loss – to which banks are connected through their financing of clients and transactions.

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However, the civic space necessary for this important work is being increasingly restricted (see People Power Under Attack, CIVICUS Monitor, 2022). In 2022 alone the Business and Human Rights Resource Centre tracked 555 lethal and non-lethal attacks against human rights defenders. And according to Global Witness’ report, Standing firm: The Land and Environmental Defenders on the frontlines of the climate crisis, at least 177 land and environmental defenders lost their lives last year.

So, what role can – and should – financial institutions play in addressing shrinking civic space? In our latest Financial Institutions Practitioners Circle report, Human Rights Defenders and Shrinking Civic Space: A Guide for Financial Institutions, we explore key aspects of this challenge, including how banks can start to overcome the barriers they may face when engaging with civil society and human rights defenders.

Shift’s Submission to the ISSB’S Consultation on Agenda Priorities

The ISSB has proposed that two of the four options for inclusion in its agenda priorities for the next two years could be ‘human capital’ and ‘human rights’: both social-related topics. This is an important and welcome signal, which in turn reflects the significance of these issues to the interests of investors. In light of regulatory and legislative developments related to human rights due diligence, this interest in reporting on social-related issues is set to continue increasing at a rapid rate.

Shift therefore strongly endorses the need for the ISSB to include within its near-term agenda research work that would lead towards a standard on social-related financial disclosures.

This submission to the ISSB’s public consultation sets out the key challenges with addressing social issues through its proposed approach, including the  difficulties arising from its proposed categorization of ‘human capital’ and ‘human rights’. It proposes an alternative approach that would focus instead on the development of a cross-cutting social standard that would align with the ISSB’s stated objectives by:

  • encompassing issues relevant to both human capital and human rights, avoiding any need to draw boundaries between them, and without needing to address the specific topics they cover in detail,
  • meeting the most essential needs of the providers of capital regarding material social-related issues by enabling them to assess the extent to which any company is equipped in its core governance, strategy and risk management to identify and manage social-related risks in its operations and value chains
  • establishing the global, foundational building blocks for reporting on social issues, following much the same approach as the ISSB Climate standard S2: mirroring the structure of standard S1 on General Requirements, but extending beyond its content by addressing significant factors particular to social-related issues
  • being coherent and interoperable with the existing European Sustainability Reporting Standards (ESRS) on social issues, including by providing a common understanding of the relevant architecture of social-related topics in sustainability reporting
  • providing a resource-efficient project that the ISSB could reasonably undertake in its immediate work plan, being (a) broader but less granular than either of the two proposed projects, (b) able to leverage substantial existing resources including the international standards on human rights due diligence and the ISSB’s own CDSB Framework for Reporting Environmental and Social Information.

The submission sets out the detailed rationale for this approach, the benefits it would bring and the resources on which it could draw.

Understanding business impacts on people: the complementary approaches of ‘business and human rights’ and ‘social and human capital’

The fields of ‘business and human rights’ and ‘human and social capital’ address the management and measurement of business impacts on people – but there is often confusion about where these approaches overlap and where they diverge.

This is partially due to their distinct starting points: the field of ‘business and human rights’ is founded on the proposition that all companies have a responsibility to respect the human rights of people affected by their operations, products and services – this is articulated in the UN Guiding Principles on Business and Human Rights and reflected in a range of other standards. The field of ‘Social and human capital’ is part of the ‘capitals approach’ to decision-making which is grounded in the principle that natural capital, social capital, human capital and produced capital form the foundation of human wellbeing and economic success. By understanding how they impact and depend on the capitals, companies are supported to make holistic decisions that create value for nature, people and society alongside businesses and the economy.

In this paper, Shift and the Capitals Coalition set out the key similarities and differences between the two approaches and outline how they can be applied together to inform business decision-making. This includes a closer look at terminology, outcomes and impacts, and their shared focus on people.