Our Approach
Why this tool
The EU Corporate Sustainability Due Diligence Directive (CSDDD) and other EU regulations positions multi-stakeholder and industry sustainability initiatives as an element of a company’s due diligence plan and a means of demonstrating compliance with the law. Click here to learn more about the relevance of MSIs to the CSDDD.
In January 2022, Rights CoLab — serving as a knowledge partner to the Value Reporting Foundation,1 — convened its Expert Group of labor rights specialists to recommend how certifications should be addressed in the SASB Standards. Certifications were a key issue for the SASB Standards Board as it updated the raw materials sourcing provisions of the Apparel, Accessories & Footwear industry standard.2 Eventually, the Standards Board approved an indicator that asks companies to report on:
CG-AA-440a.4. 2. [the] amount of each priority raw material that is certified to a third-party environmental or social standard, by standard
For each priority raw material, the entity shall discuss:
3.1 Why it has chosen the specified third-party certification(s)/standard(s)
3.2 How the certified materials contribute to managing the entity’s business risks and opportunities
3.3 Any quantitative targets it has set for certified priority raw materials3
The Expert Group generally agreed with the Standards Board’s decision not to define a set of principles — doing so would be insufficient since the strength of a certification cannot be assessed without also understanding how a given certification operates in practice. It also urged caution in including a list of approved certifications in the standard, as the original version of this and other SASB industry standards had done. The Expert Group reasoned that investors would benefit from additional guidance to be able to judge the information that companies disclose about certifications against the indicator and to support their corporate engagement on this topic. The idea for this tool was born out of this conversation. To build out an initial concept, Expert Group members brainstormed red flags and shared the resulting matrix with SASB research staff as a potential starting point for guidance that could support the new SASB indicators.
Method
Building on an initial concept developed with the Expert Group that Rights CoLab convened in 2020–2022 to support the Value Reporting Foundation’s human capital work, we conducted a comprehensive literature review spanning NGO reports, scholarly articles, and judicial and non-judicial complaints involving sustainability initiatives to create the tool prototype. To test it, we co-led a workshop on Equitable Global Supply Chains at the Fall 2023 ICCR Conference, where we invited investor and civil society participants to take part in a role play using the Red Flags. Based on their feedback, we revised the prototype.
From December 2023 to January 2024, we held three additional investor roundtables to gather input on the tool’s use cases and ways to enhance its usability for diverse investors: two online small-group sessions with a total of 22 European and North American investors, and a hybrid roundtable in Melbourne hosted by Investors Against Slavery and Trafficking in the Asia Pacific (IAST APAC) with 20 investor members.
Throughout the process, we sought input from leading scholars, human rights advocates, and the sustainability initiatives referenced in the tool. We commissioned five human rights in supply chain experts to review the draft and provide comments, and incorporated documentation of certification risks and opportunities from published articles, reports, and judicial and non-judicial complaints. We offer these key resources as a supplement to the tool (see Further Reading).
We also invited the initiatives named in the report to review the tool and to inform us of any updates to their standards or processes that demonstrate their continuous improvement. We took these responses into account and revised the text accordingly.1
In April 2024, Rights CoLab met with the ISEAL Alliance, a non-profit organization that promotes best practices in social and environmental auditing to “accelerate positive change by improving the impacts of ambitious sustainability systems and their partners.”2 Across this tool, we reference ISEAL’s Credibility Principles, the Assurance Code of Good Practices, and the Impacts Code of Good Practices. During the meeting with ISEAL we discussed how to ensure this tool aligns with ISEAL standards.
We also sought alignment with relevant standards from the International Organization for Standardization (ISO), a non-governmental international organization that convenes experts to standardize various business processes. In particular, we reviewed ISO 17065, “Conformity Assessment – Requirements for Bodies Certifying Products, Processes, and Services,” which focuses on sustainability certifications. This tool contains references to key elements of this standard as it relates to the Red Flags.3
Following the launch of the beta version of the tool in July 2024, we continued to gather feedback from investors on its use cases and opportunities to strengthen its practical application. In October 2024, we participated in PRI in Person in Toronto, where we led a workshop on the Investor HREDD Precision Tools with PRI Advance members. We also convened a Learning and Feedback session with Asia Pacific investors with support from the Responsible Investment Association Australasia (RIAA).
In response to investor request for additional guidance on applying the Red Flags framework, we developed a checklist of 20 questions to support users in assessing sustainability initiatives against the indicators. As part of this process, we invited the sustainability initiatives featured in the tool to complete the checklist and received completed checklists from twelve initiatives. This exercise helped us refine the checklist and to identify opportunities to further strengthen the Red Flags guidance. Because the tool covers a wide range of initiatives, including those that do not certify, we changed the name of the tool to Red Flags in Sustainability Initiatives.
1 We were unsuccessful in reaching the following initiatives: amfori’s Business Social Compliance Initiative, C.A.F.E Practices, Indonesia Sustainable Palm Oil (ISPO), Kimberley Process, and RINA. All other schemes reviewed the report and replied with comments and information about updates to their standards.
2 “Our Mission,” ISEAL Alliance, accessed June 7, 2024, https://www.isealalliance.org/about-iseal/our-mission.
3 Since ISO standards are not publicly available, we focused on the key elements of ISO 17065 that are accessible to the public.
The examples
The case examples in this tool are drawn from publicly available sources. The “Why Investors Should Care” section includes claims implicating a social sustainability initiative in lawsuits or non-judicial grievance mechanisms, such as OECD National Contact Point complaints, as well as widely publicized incidents — reported by NGOs and the media — that occurred despite certification or membership in a sustainability initiative and have imposed costs for companies and investors.
Examples are drawn from certification schemes as well as other third-party auditing, including industry- or issue-specific multi-stakeholder initiatives that have a standard of conduct required for membership but do not offer certification. A common feature of these initiatives is corporate members’ attestation of their human rights and environmental commitments. We cite such initiatives when we think they help to illustrate a Red Flag or a good practice that prevents it.
The examples do not constitute a judgment on the scheme or initiative. A hallmark of a credible initiative is a commitment to continuous learning and improvement. If the tool highlights a scheme’s weakness as a Red Flag and the scheme later addresses it — fully or partially — by revising its standards, guidance or procedures, we make note of that progress.
Acknowledgements
Certifications Red Flags is authored by Joanne Bauer and Silvana Zapata-Ramirez, with contributions from Shauna Curphey. Manuela Corredor Vásquez and Julia Falkow contributed to the research.
Certifications Red Flags is part of the Investor HREDD (Human Rights and Environmental Due Diligence) Precision Tools Project, a collaborative initiative led by Rights CoLab in partnership with The Committee on Workers Capital, EIRIS Foundation, ESG Inteligente, Interfaith Center on Corporate Responsibility/Investor Alliance for Human Rights, Labor Rights Investor Network, Principles for Responsible Investments, Responsible Contracting Project, and Workforce Disclosure Initiative. Special thanks to partners Caroline Boden, Chavi Keeney Nana, Melina Fachin, Jana Hoess, Polly Marsh, Rebecca DeWinter-Schmitt, Rémi Fernandez, Rita Sebestyén, and Sarah Dadush for their input. This tool also greatly benefitted from the expertise of Anna Canning (Worker-Driven Social Responsibility Network), Mark Wielga (NomoGaia), Olivia Windham Stewart (Independent Consultant), and Shawn MacDonald (Verité), and Scott Sellwood (Initiative for Responsible Mining Assurance) who reviewed and provided detailed comments on the draft.
The Investor HREDD Precision Tools Project was made possible through the generous support of the Generation Foundation, Global Commons Alliance, a sponsored project of Rockefeller Philanthropy Advisors, and Humanity United.
Made possible through the generous support of:
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GO TO THE CHECKLIST ↗Footnotes — Why this tool
1 The Value Reporting Foundation housed the standards until the organization’s consolidation into the newly formed International Sustainability Standards Board (ISSB) of the IFRS Foundation in 2022.
2 Beginning in January 2020, Rights CoLab worked as a knowledge partner to the SASB research team, assembling a group of labor rights experts — the Expert Group — to support recommendations. This later developed into an MoU (memorandum of understanding) with the Value Reporting Foundation. For more on the work, see “Rights CoLab and Value Reporting Foundation Formalize Partnership by Signing MOU,” Rights CoLab, September 27, 2021, https://rightscolab.org/rights-colab-and-sasb-formalize-partnership-by-signing-mou/.
3 For the full standard, see Sustainability Accounting Standards Board, Apparel, Accessories & Footwear: Sustainability Accounting Standard (2023), 6 and 26, https://www.ifrs.org/issued-standards/sasb-standards/.
