"Today, we are very glad to present the Shadow Guidelines on Living Income in the CSDDD, which we’ve worked on with the Fair Trade Advocacy Office (FTAO).
The EU Corporate Sustainability Due Diligence Directive (CSDDD) introduces groundbreaking mandatory rules so due diligence on human rights and the environment in the EU no longer depends on voluntary initiatives.
The FTAO Shadow Guidelines focus on the application of the CSDDD to the right to a living income and we designed them to support in the development of the Commission guidelines.
It is the result of a collaboration between several experts and the involvement of many stakeholders during the drafting process. For example, we hosted two validation workshops directly with smallholder farmers and their representatives. The goal is to ensure clarity on how to comply with the CSDDD’s LIDD requirements, while aligning with the UN Guiding Principles (UNGPs) and the OECD Guidelines.
Because the CSDDD is a legislative instrument, it departs in some places from the non-mandatory UNGPs and OECD Guidelines. Where the CSDDD leaves room for interpretation, the intention was to align and indicate how companies should read the CSDDD in light of them. The recommendations were also developed in close collaboration with the LICoP and Shift. We therefore recommend reading the Shadow Guidelines together with the LICoP Technical Guidance and the UNGPs/OECD instruments.
There shortcomings where the CSDDD diverges from OECD/UNGPs mostly reflect a trade-off between a fully risk-based approach and the desire to minimise administrative burden and increase legal certainty for companies. A striking example is the limited scope of covered companies. At the same time, it is important to stress that the CSDDD uses the term “business partner” broadly, covering both direct and indirect business partners, and maintains a largely risk-based approach in line with UNGPs and OECD Guidelines.
For those less familiar with the CSDDD, it entered into force in July 2024 and sets mandatory rules for companies to conduct human rights and environmental due diligence in their own operations and in their chains of activities. Its application has, however, been delayed and modified through the Omnibus I review, which is now concluded and the new text agreed.
The revised CSDDD applies to EU companies with more than 5 000 employees on average and a net worldwide turnover of more than EUR 1.5 billion and to non‑EU companies with a net turnover of more than EUR 1.5 billion generated in the EU.
The CSDDD will start applying in July 2029, giving companies several (more) years to prepare. Before that, by July 2027, the European Commission must issue guidance to help companies and national authorities interpret and implement the directive. This will be a critical process. We hope the FTAO Shadow Guidelines may help inform how companies should apply the CSDDD in cases of actual or potential adverse living income impacts.
There is a huge need to progress. Millions of smallholder farmers, self-employed workers and their families still lack just and favourable conditions of work and are faced with earnings below a living income. This is often, not always, the direct result of company policies – or lack thereof.
Nonetheless, many of the very large companies which will be subject to the CSDDD are still unaware or inactive when it comes to addressing living income risks in their own operations and supply chains. The CSDDD should ensure that these companies finally identify living income risks and address these risks, especially the most severe and likely ones, through appropriate measures. The FTAO Shadow Guidelines seek to explain CSDDD concepts – such as “adverse impact”, “severity”, “likelihood” and “appropriate measures”.
Although the CSDDD will not be able to solve all living income issues, it should prevent companies from looking away or from benefiting from business models that keep smallholder households below a living income.
The EU directive anchors living income and living wage explicitly as human rights in Annex I which refers to the right to enjoy just and favourable conditions of work, including ‘an adequate living income for self‑employed workers and smallholders. This right to a living income should be interpreted in line with Articles 7 and 11 of the International Covenant on Economic, Social and Cultural Rights.
The FTAO Shadow Guideline explains the notion of “adverse impact” under the CSDDD, which is important to understand here. It refers to a situation where a company’s policies, practices, or omissions result in the abuse of the right to a living income. So, preventing self‑employed workers or smallholders, and their households, from achieving a living income constitutes an ‘adverse impact’ under the CSDDD.
Companies should always consider the severity of situations for households. It can be observed that many living income issues lead to severe adverse impacts in practice. Living income gaps – although not always the responsibility of companies – are directly linked to poverty levels, but also create to other HR and E risks: child labour, forced labour, gender discrimination, labour risks, deforestation, environmental degradation, etc. etc. This is why living income gaps are often referred to as ‘structural root causes’ of a variety of other adverse impacts – and this should be considered as well when assessing the severity.
We see here the complexity of the living income concept. The FTAO Shadow Guidelines clarify how companies can be linked to such adverse living income impacts, following the CSDDD’s three categories of involvement: – Impacts caused only by the company. – Impacts caused jointly by the company and a subsidiary or business partner. – Impacts caused only by a business partner but linked to the company’s operations or chain of activities.
All in‑scope companies must identify, assess and prioritise actual and potential adverse impacts (Articles 8 and 9). First, they use reasonably available information (for example, sector and country risk data) to identify general areas of risk in their own operations and their chains of activities. Then they carry out in‑depth assessments, including information from business partners, in those areas where impacts are most likely and most severe. This is where companies can identify living income gaps more accurately; the Shadow Guidelines include references and many examples to relevant risk factors, proxies and indicators associated with living income deficits. It also includes useful data sources of living income benchmarks in many different countries.
Once identified, adverse living income impacts must be addressed appropriately. However, companies must prioritise the most severe and likely adverse impacts. Here, both the number of affected households and the depth of the living income gap are important elements to take into account. Once identified and prioritised, companies must take measures under the CSDDD prevent, end or minimise, or remediate adverse living income impacts (Articles 10, 11 and 12).
Key levers under a company’s control to address living income gaps are: – Their pricing and purchasing practices. E.g. Living Income Reference Prices is a tool used by several companies which can be effective, when used correctly. – Their codes of conduct - Annex I lists a number of elements specifically related to Living Income Due Diligence. – Their contractual clauses, including the cascading of contractual assurances to address indirect business partners’ contribution to living income gaps. – The involvement of its stakeholders – as defined in the CSDDD. – Dedicating relevant internal resources and staff to LI
The Shadow Guidelines also highlight how living income risks should be addressed as part of other CSDDD obligations, including: Stakeholder engagement (Article 13); Notification and complaint mechanisms (Article 14); Monitoring the effectiveness of due diligence – crucial for Living Income Due Diligence (Article 15); Public annual reporting on CSDDD compliance (Article 16).
Finally, although these Shadow Guidelines should be relevant across sectors, it highlights a few sectors where living income risks are particularly acute: smallholder‑based agricultural supply chains; textiles, garments, leather; footwear, mining, minerals and extractives, as well as living income risks related to the relatively new category of platform workers.
Although companies remain fully responsible for their own due diligence compliance, I will highlight here the valuable support provided by various industry initiatives and multi‑stakeholder platforms offering expertise and resources on living income.
In conclusion, the CSDDD can become a major milestone in advancing the right to a living income globally and ensuring that large companies are no longer enjoying a competitive advantage in creating or maintaining living income gaps. The FTAO Shadow Guidelines aim to show how a correct and ambitious application of the CSDDD due diligence requirements can help companies meet these responsibilities and contribute to closing those gaps in practice."
Transcript of the speech delivered by Sébastien Garnier, Managing Director AxHA in the European Parliament on 25 February 2026 as part of the Policy Roundtable 'From legislation to practice: Delivering Living Income through Due Diligence'. Organised by Fair Trade Advocacy Office & the Living Income Community of Practice (LICoP). With the support of the Sustainable Textiles Working Group. Hosted by Saskia Bricmont, Member of the European Parliament (Greens/EFA).
Download the 'Guidelines for a Living Income: Fair recommendations for Living Income Guidance in the Corporate Sustainability Due Diligence Directive' here: https://fairtrade-advocacy.org/posts/220-guidelines-for-a-living-income-fair-recommendations-for-living-income-guidance-in-the-corporate-sustainability-due-diligence-directive _
Photo by HIMSHEK KUMAR on Unsplash