Why Human Rights and Environmental Due Diligence (HREDD) is Financially Material—and How ISSB Standards Must Evolve

As the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) and new regulations worldwide usher in a new era of accountability, Human Rights and Environmental Due Diligence (HREDD) is no longer just an ethical imperative—it’s a cornerstone of financial materiality for global business.

Our new report—Roadmap for Integrating Human Rights Due Diligence into ISSB Standards—explores why and how HREDD should be embedded within the ISSB Standards, a global baseline for sustainability disclosure that is specifically designed to meet the information needs of investors and financial markets:

• Demonstrated Financial Materiality: With mounting evidence from investors, regulators, and international frameworks, HREDD is now inextricably linked to financial performance and enterprise risk management. Our analysis shows that meaningful HREDD directly supports the ISSB’s financial materiality lens, and helps to bridge the gap between financial materiality and real-world impacts.
• Foundations for Integration: The ISSB’s IFRS S1 and SASB Standards set the bar for sustainability-related disclosures. Yet, their existing approach only partially captures the processes of HREDD.
• Comprehensive Gap Analysis: Using the OECD Due Diligence Guidance as a benchmark, the report systematically maps where ISSB Standards align with—and where they fall short of—robust HREDD practices, covering all six due diligence steps and eleven key characteristics.
• Recommendations for Action: The Roadmap offers actionable strategies for the ISSB and reporting companies, including the need for explicit disclosure on all HREDD steps, improved due diligence metrics, integration of stakeholder engagement, and greater alignment with international norms.

Why is this important?

As the ISSB Standards are designed for global adoption and used by investors to evaluate sustainability issues that are material to decision making, integrating HREDD is essential for meeting both emerging regulatory requirements and investor demands for relevant, decision-useful disclosure on companies’ risk identification and mitigation processes.

Cover photo by CHUTTERSNAP on Unsplash