EU: Shift publishes briefing on risk-based due diligence
"What is risk-based due diligence? And what is it not? Getting back to basics as part of EU Omnibus simplification.", 8 April 2025
...Drawing on over a decade of experience working with business to implement due diligence, here is Shift’s view about the basics of risk-based due diligence that EU policy makers should reinforce, and not lose sight of, in the weeks and months ahead.
Risk-based due diligence is about companies directing attention to their greatest sustainability risks... Risk-based due diligence always starts with the same simple steps. These are the same steps that companies need to take to determine the focus of reporting.
To identify impacts and make robust decisions about where to focus, companies follow these same initial steps:
1: Identifying, based on the best available information, which areas of the company’s operations and value chain are most likely connected to the most serious impacts.
2: Understanding more about the impacts in those areas, using various sources of information to build up that picture.
3: Establishing which issues merit most urgent attention based on the relative severity and likelihood of the impacts the company has identified...
Risk-based due diligence involves companies making good faith judgements based on reasonably available information. It is not about waiting for issues to materialize. But equally, it is not about burdensome entity-by-entity assessments and questionnaires in the mythical search for perfect information. Risk-based due diligence is about being on the front foot in managing risks. This requires companies to make use of, and where necessary seek out, sustainability intelligence relevant to their business [...]
...Reducing sustainability due diligence within EU regulation to a set of “one size fits all” procedural rules and tick-box exercises will achieve little more than wasting resources by focusing companies where they are least needed. It will leave companies exposed more generally to legal and other consequences around the world because they have not identifed the risks that matter most, and which other governments and national legislation in countries, including the United States, are asking them to address...