Key Takeaways
- An economic activity that meets every environmental criterion still fails taxonomy alignment if the entity cannot demonstrate compliance with minimum safeguards.
- The assessment covers four topics: human rights (including labour rights), bribery and corruption, taxation, and fair competition.
- The Platform on Sustainable Finance's October 2022 final report recommends a two-part test combining procedural checks with outcome-based indicators.
- Compliance with the CSDDD (post-Omnibus I: entities with 5,000+ employees and €1.5B+ turnover) does not automatically satisfy minimum safeguards for smaller entities outside that scope.
What is Minimum Safeguards?
Article 18 of the EU Taxonomy Regulation requires that an entity carrying out a taxonomy-aligned activity implements procedures aligned with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights (UNGPs). The article also references the ILO Declaration on Fundamental Principles and Rights at Work and the International Bill of Human Rights.
The Platform on Sustainable Finance translated these references into practical guidance in its October 2022 final report, proposing a two-part assessment for each topic. The procedural element asks whether the entity has adopted a human rights due diligence process, anti-bribery controls, a tax governance framework, and competition law awareness programmes. The outcome element checks whether final court convictions or equivalent administrative decisions exist against the entity on any of the four topics. A conviction does not automatically disqualify the entity, but the absence of adequate procedures does. If the statutory auditor identifies potential non-compliance with anti-bribery or competition law during the financial statement audit, ISA 250 applies and may inform the minimum safeguards conclusion.
Human rights due diligence sits at the centre of the assessment. The Platform's report states that an entity is unlikely to comply if it has not established adequate processes or if clear indications show it fails to implement those processes in practice. For entities also subject to the CSRD, ESRS S1 (own workforce) and ESRS S2 (workers in the value chain) disclosures provide evidence that feeds directly into the minimum safeguards assessment.
Worked example: Rossi Alimentari S.p.A.
Client: Italian food production company, FY2025, revenue €67M, IFRS reporter. Rossi sources olive oil and dairy from over 40 agricultural suppliers across southern Italy and North Africa. The entity reports three economic activities as taxonomy-eligible and now assesses minimum safeguards for alignment.
Step 1 — Map the four topics to existing policies
Rossi's compliance team reviews the entity's code of conduct, supplier contracts, whistleblower channel, and tax governance framework against the four minimum safeguards topics. The entity has a supplier code referencing ILO core conventions and a whistleblower procedure compliant with Directive (EU) 2019/1937. It lacks a standalone human rights due diligence policy.
Step 2 — Assess the procedural element for human rights
Rossi falls below the CSDDD thresholds (5,000 employees, €1.5B turnover) and has no statutory obligation to conduct formal human rights due diligence. The Platform's guidance still requires adequate processes. Rossi's management adopts a human rights due diligence policy covering its agricultural supply chain, assigns responsibility to the procurement director, and schedules annual audits for the 12 highest-risk suppliers.
Step 3 — Assess the outcome element across all four topics
The compliance team confirms no final court convictions or pending proceedings against Rossi for bribery, tax evasion, anti-competitive behaviour, or labour rights violations. One supplier received a labour inspection fine in 2024 for working-time violations. Rossi documents the corrective action taken (contract amendment requiring quarterly compliance certificates from the supplier).
Step 4 — Conclude on minimum safeguards compliance
Rossi's assessment produces a positive conclusion on all four topics. The human rights gap identified in Step 1 (no standalone policy) was remediated in Step 2. The supplier labour finding in Step 3 does not disqualify Rossi because the entity took documented corrective action. The three taxonomy-eligible activities may proceed to the environmental assessment for taxonomy alignment.
Conclusion: Rossi's assessment is defensible because it addresses all four topics with documented procedures and outcome checks, and remediates the identified gap before concluding.
Why it matters in practice
- Teams frequently treat minimum safeguards as a box-ticking exercise, confirming the existence of a code of conduct without evaluating whether the entity actually implements its due diligence processes. The Platform on Sustainable Finance's October 2022 report states that an entity is unlikely to comply if it has not established adequate human rights due diligence or if clear indications show inadequate implementation. A policy document alone does not satisfy Article 18.
- Entities outside the CSDDD scope (below 5,000 employees or €1.5B turnover post-Omnibus I) sometimes assume minimum safeguards do not apply to them. Article 18 applies to every entity claiming taxonomy alignment, regardless of size. Smaller entities must still demonstrate equivalent procedures to pass the minimum safeguards test.
Minimum safeguards vs. DNSH (Do No Significant Harm)
| Dimension | Minimum safeguards (Article 18) | DNSH (Article 17) |
|---|---|---|
| Focus | Social and governance due diligence | Environmental harm prevention |
| Assessment basis | Procedural (policies, processes) and outcome (convictions, violations) | Technical screening criteria set by delegated acts |
| Scope | Entity-wide across the four topics | Activity-specific for each environmental objective |
| Governing standards | OECD Guidelines, UNGPs, ILO Declaration | Delegated Regulation (EU) 2021/2139 technical criteria |
| Interaction with CSRD | ESRS S1, S2, G1 disclosures provide supporting evidence | ESRS E1–E5 disclosures provide supporting evidence |
Both criteria must be satisfied for taxonomy alignment. An activity that passes the DNSH environmental screening but fails minimum safeguards on human rights due diligence cannot be reported as aligned.
Related terms
Frequently asked questions
Do minimum safeguards apply to taxonomy-eligible activities or only taxonomy-aligned activities?
Minimum safeguards apply at the alignment stage. An entity can report an activity as taxonomy-eligible without assessing minimum safeguards. The assessment becomes mandatory when the entity claims taxonomy alignment under Article 3 of Regulation 2020/852, because all four criteria (substantial contribution, DNSH, minimum safeguards, technical screening criteria) must be met simultaneously.
How do I document a minimum safeguards assessment?
Document each of the four topics separately. For each, record the procedural element (which policy exists, when it was adopted, who owns it) and the outcome element (conviction checks, regulatory database searches, media screening, and internal incident reports). The Platform on Sustainable Finance recommends retaining evidence of both elements in the taxonomy alignment file.
Does CSDDD compliance automatically satisfy minimum safeguards?
Not entirely. An entity subject to the CSDDD (post-Omnibus I: 5,000+ employees and €1.5B+ turnover) will have statutory due diligence obligations that overlap with the human rights element of minimum safeguards. The non-human-rights topics (anti-corruption, taxation, fair competition, and related governance matters) still require separate assessment against the OECD Guidelines, because the CSDDD does not cover them to the same depth.