About the European Commission’s Omnibus Simplification Proposal on EU Sustainability Due Diligence and Reporting Laws
In 2024, the President of the European Commission announced that the Commission would bring forward a proposal to simplify requirements and reduce burdens on smaller companies, including in connection with the recently adopted Corporate Sustainability Due Diligence Directive (CSDDD) and the more established Corporate Sustainability Reporting Directive (CSRD). In February 2025, the Commission announced its ‘Omnibus Simplification Proposal’. While the goals are reasonable ones for European Union (EU) policy-makers to pursue, in fact the proposal risks making life more complicated for both large and small companies.
You can read Shift’s initial assessment of the Omnibus Proposal here. In it, we explain how the proposal would make it much harder for companies to ‘know and show’ that they are managing the human rights and environmental risks they face, and leave them on the back foot when they are ‘named and shamed’ by the media and NGOs when things go wrong in their supply chains.
Shift will continue to be actively involved in the Omnibus legislative process based on our mission to advance alignment of influential standards with the UN Guiding Principles on Business and Human Rights. We will regularly share resources and updates here, so please check back in or sign up to our newsletter here.
About the EU Corporate Sustainability Due Diligence Directive
Beginning in 2017, several European states including France, Germany and the Netherlands began to adopt versions of human rights due diligence legislation. This created momentum for the EU to help level the playing field.
In 2022, the EU began negotiating a draft Corporate Sustainability Due Diligence Directive (CSDDD) which was finally adopted in May 2024. During this time, Shift’s focus was on ensuring the CSDDD was anchored in the international standards on sustainability due diligence – the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. Despite limitations with regard to the scope of companies covered under the Directive, and limited obligations with regard to due diligence on downstream impacts, the core content of the final law was substantially aligned with the UNGPs – making it more likely to be both impactful for people and planet and manageable for companies to implement. The Directive provides that EU Member States have two years to transpose it into their national laws. Enforcement would then commence one year later for the first batch of covered companies, with the others following after. The Directive was expected to cover more than 5500 companies. For more information, check out Shift’s responses to Frequently Asked Questions about the CS3D.
How should companies respond to the current regulatory uncertainty?
Given the uncertainties created by the Omnibus Proposal and negotiation process, our advice to companies that want to know how they should respond is simple – keep doing risk-based due diligence in line with the existing international standards. That remains the single best investment companies can make to prepare to meet current and future demands, whether from investors, lenders, customers, civil society or EU policy-makers as this process moves forwards.
Core Resources
Our analysis
5 resources
Frequently Asked Questions about the EU Corporate Sustainability Due Diligence Directive
In this resource, Rachel Davis (Co-Founder), and Ruben Zandvliet (Deputy Director for Standards), answer companies’ frequently asked questions about the new Corporate Sustainability Due Diligence Directive. Since the approval of the Corporate Sustainability Due Diligence Directive (CS3D) by senior officials from EU Member States in Council on 15 March, we’ve received numerous questions from companies […]
Aligning the EU Due Diligence Directive with the International Standards: Key Issues in the Negotiations
Aligning the CS3D with the core concepts in the international standards The EU is currently in the process of negotiating a legal instrument that will establish new corporate human rights and environmental due diligence duties across the single market – the draft Corporate Sustainability Due Diligence Directive (CS3D). At the heart of the negotiations is […]
Designing an EU Due Diligence Duty that Delivers Better Outcomes
What is the CS3D? Starting in 2022, the European Union has been negotiating a draft Directive on Corporate Sustainability Due Diligence (CS3D), with discussions on a final law expected to begin by mid-2023. The draft Directive aims to ensure companies active in the single European market contribute to sustainable development by preventing and addressing negative human rights and environmental impacts. […]
Shift’s Analysis of the EU Commission’s Proposal for a Corporate Sustainability Due Diligence Directive
On 23 February 2022, the European Commission released its ‘Proposal for a Directive of the European Parliament and of the Council on Corporate Sustainability Due Diligence. Its overall objective is to ensure that companies active in the internal market contribute to sustainable development …through the identification, prevention and mitigation, bringing to an end and minimization […]
“Signals of Seriousness” for Human Rights Due Diligence
This discussion draft is intended for the consideration of the European Commission and other stakeholders as the Commission develops proposals on mandatory human rights and environmental due diligence (mHREDD) and considers how national regulators would implement any such legislation. Shift is submitting this draft together with our formal response to DG JUST’s consultation on a […]
Previous Comments and Analysis by Shift
- Rachel Davis’ March 2022 COMMENTS to the European Parliament RBC Working Group on the release of the Commission’s proposal
- Our March 2022 ANALYSIS of the Commission’s proposal for a draft Directive
- Our October 2021 Key Design Considerations for the Enforcement of Mandatory Due Diligence, developed in collaboration with the Office of the UN High Commissioner for Human Rights
- Our August 2021 viewpoint on how legislating a new standard of conduct CONNECTS TO OUTCOMES FOR PEOPLE
- Our July 2021 viewpoint on the relationship between HUMAN RIGHTS AND ENVIRONMENTAL DUE DILIGENCE
- Our June 2021 viewpoint on the need to include SMEs in the scope of new regulations while allowing them APPROPRIATE FLEXIBILITY
- Our April 2021 recap of the mHRDD debate in Europe (see below)
- Our February 2021 RESPONSE to the European Commission’s initial consultation on the need for an initiative on sustainable corporate governance
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:
- What is Human Rights Due Diligence and where does it come from?
- Is the CS3D some new kind of ‘European due diligence’?
- Is the CS3D aligned with the international due diligence standards on business and human rights?
- What is the role of administrative supervision in the enforcement of the CS3D?
- What does civil liability in the CS3D apply to? What does this mean for companies?
- What about Member States – what are they required to do?
- As a company, what can I do now?
- What about impacts in downstream business relationships – are these still covered by legislation?
Whether these are your first steps as a company on the sustainability due diligence road, or you’re well on your way, we hope these resources will help you take the CS3D confidently in your stride.
As a non-profit organization, Shift has been committed to advancing business respect for human rights from the get-go – first in our role helping to draft the UN Guiding Principles on Business and Human Rights (UNGPs), and in the decade since their adoption, embedding them into business practice with companies, financial institutions, civil society organizations and standard-setters around the world.
Tackling Child Labor: A Guide for Financial Institutions
Also Read
September 2023 |
Human Rights Defenders and Shrinking Civic Space: A Guide for Financial Institutions
ReadIn 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.
Also Read
July 2023 |
Indigenous Rights and Financial Institutions: Free, Prior and Informed Consent, Just Transition and Emerging Practice
ReadHowever, 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.