It’s been a hard couple of years for ESG and thing that has become abundantly clear is that the stakes in the ESG arena have never been higher with no shortage of ESG controversies. With the scrutinization of companies reaching news heights through the lens of ESG risks, the reverberations of ethical missteps and environmental negligence are being felt far and wide. Here, we’ll provide an overview of the ESG controversies of 2023 and 2024 that rocked the business world in this two-year retrospective.
ESG controversies: Data privacy
First, let’s start with Big Tech’s ongoing struggle with data privacy. Meta – as we all know – is no stranger to controversy. In this case, it was found to be collecting and storing user data without explicit consent. Bad boy, Zuckerberg. Joining the naughty list was Google, which was accused of tracking users’ locations even when location services were turned off. To top things off, Amazon was also slammed over the misuse of Ring doorbell data, where employees had unauthorized access to users’ video feeds.
Now, nearly all these ESG controversies highlight the ongoing tension between data-driven business models and user privacy rights, as so often sparking widespread public outrage and a decline in consumer trust. All of the tensions highlighted by these ESG controversies reignited debates about the need for stricter regulations and enforcement mechanisms to protect user data and privacy. As ever, need to strike that ever elusive balance between data-driven innovation and respecting user privacy is a key issue.
ESG controversies: Fast fashion
If you thought Big Tech was stuck in a tight spot, spare a thought, then, for the fashion industry, grappling with its own demons. Can fast fashion ever mend its ways? By the looks of the last couple of years, the fast fashion industry has a long way to go. First up, is fast fashion giant Shein. They once again found themselves in an ESG tight spot, being scandalized for its use of forced labour in its supply chain. An investigative report revealed that workers in factories producing Shein’s clothing were subjected to inhumane working conditions, including long hours, low wages, and physical abuse. Then there was Boohoo, who was slammed with allegations of labour exploitation, with reports indicating that workers in its UK supply chain were paid below the minimum wage and worked in unsafe conditions. Perhaps the most surprising for the industry (or perhaps not) was when H&M came under fire for similar issues in its supply chain, despite its very public commitments to ethical labour practices.
Yet even now, these ESG controversies drew attention to the broader issue of supply chain transparency and the need for companies to ensure ethical labour practices throughout their supply networks. The alarm bells are ringing with the public outcry and subsequent boycotts pressuring these brands to address these issues, but the damage to their reputations was significant and long-lasting. Almost every we speak to about these issues says that the trouble is the very model of fast fashion seems at odds with ethical labour practices. It’s a reasonable argument that consumers bear some responsibility, but ultimately the onus must fall on these retail giants to clean up their act, of that there is absolutely no shadow of a doubt.
ESG controversies: Energy sector
So far, so predictable, perhaps you might be thinking? But away from all the noise surrounding tech and fashion, the energy sector has had its fair share of ESG controversies – again, predictable yet again. First comes BP, which is without doubt no stranger to criticism in this area. Where shall we start? First there was the announcement of their weakened climate targets and a reduction in its Scope 3 emission reduction targets from 35-40% by 2030 to just 20-30%. This move was coupled with increased investments in oil and gas, drawing significant backlash from ESG investors who had previously seen BP as a leader in net-zero commitments.
Then let’s not forget their list of oil spills over the years – which is mind-boggling to say the least. But more specifically in 2023 they were responsible for 511 thousand litres of oil spill in 2023 alone – a significant portion of this was unrecovered. Next to take the floor was ExxonMobil, which dominated headlines when it was revealed that the company had suppressed internal research on climate change for decades while publicly denying the impact of fossil fuels on global warming. To add to this, they were also implicated in controversies regarding breaches of oil spill insurance policies in Guyana.
This section would not be complete without the mention of Shell and their oil spill from a Shell pipeline in Nigeria which affected farms and rivers, exacerbating pollution in an already impacted region which saw them being once again lambasted for their environmental (mis)management and accountability
So as usual – we are exasperated to say – the energy sector continues to slip up and come under fire for their environmental practices, much to the dismay of those working in the sustainability space. But as usual with the energy sector, this all just feels like the tip of the iceberg. One can be under no illusion that the present outlooks signals the need for stronger environmental regulations and more robust safety measures in high-risk industries. If experience tells us anything (which usually it does), all the evidence points to the growing urgency of corporate responsibility in addressing environmental issues and mitigating their impact throughout the sector. The bad news is for energy companies is that the scrutiny and need to accountability is only likely to intensify as the world strives to meet its net zero targets. It’s time to stop the excuses.
ESG controversies: Corporate governance
Increasingly important has been the issue of corporate governance. We remember very well when the Wirecard incident dominated the headlines, leaving the industry in shock when it was embroiled in a massive fraud scandal that involved the falsification of financial records. This literally broke the bank, leading to the collapse of the entire company. Meanwhile, Credit Suisse was also left reeling when major governance issues were exposed, unearthing their adequately supervise risky investments. This led so the sounding of their death knell, as they battled with significant financial losses and were ultimately swallowed up by UBS. Last but not least – a usual suspect – Wells Fargo, who has continued to struggle with governance challenges throughout this period, with fresh reports of unethical sales practices and inadequate oversight.
Everywhere you looked during this period, these ESG controversies sparked broader discussions about the role of corporate boards in overseeing executive behaviour and ensuring compliance with ethical standards – and quite rightly so. There is no doubting that they also highlighted the need for greater transparency and accountability in corporate governance, as stakeholders like investors increasingly demand that companies operate with integrity and responsibility in a long overdue shake up.
ESG controversies: Diversity and inclusion
The S in ESG is often overshadowed, with the E and G holding court, but throughout 2023 and 2024 has seen social issue rising in prominence in the ESG agenda, in part thanks to the various ESG controversies which have been driving social issues higher up the ESG agenda. So what’s actually been going on here? First, the obvious. Banking giant Goldman Sachs faced the full force of ESG controversies when a whistleblower accused the company of systemic discrimination against minority employees. Again and again, the allegations included disparities in hiring, promotion, and pay practices, suggesting that the company’s diversity initiatives were largely performative. Taxi anyone? You’re in luck because just as notably, Uber faced scrutiny over allegations of workplace harassment and a toxic corporate culture, despite efforts to improve its diversity and inclusion policies. But hold on – the diversity and inclusion crisis left us all surprised when it even extended to Pinterest, which was criticized for a lack of diversity in its leadership team and for failing to address racial discrimination within the company.
What’s the upshot of all of this? Quite simply that the loss of trust in connection with diversity and inclusion in these companies has led to widespread criticism from employees, customers, and advocacy groups, prompting these companies to launch internal investigations and commit to substantive changes. Much of this highlighted the broader issue of tokenism in corporate diversity efforts and the need for genuine, meaningful action to promote inclusion and equity. But above all, pushed the envelope for social issues in the ESG agenda in a way that has been long overdue.
ESG controversies: Greenwashing
Greenwashing is a particular bug bear of ours, and unfortunately, it remains a persistent and significant challenge threatening to thwart sustainability efforts – even if it is being covered up by the more recent practice of greenhushing. With many new cases coming to light in 2023 – 2024 (see greenwashing 2024 update here), this obviously deserves a whole article of its own, but here’s we’ll just whizz through some of the most prominent cases. First comes to mind is Nestlé, which faced fresh accusations of overstating the recyclability of its packaging in a big way. It may have been marketing its products as environmentally friendly, but investigations revealed that much of the packaging was not, in fact, recyclable due to a lack of infrastructure in many regions which was a big mistake. Then there was a big splash when Unilever was criticized for claiming that its products were sustainable, despite evidence that the company’s supply chain contributed to deforestation and biodiversity loss. And then there was Coca-Cola – a name which seems to repeatedly come up in connection with greenwashing – which also faced backlash for promoting its use of recyclable materials while being one of the world’s largest producers of plastic waste.
In our view – greenwashing is an extremely toxic practice which hurts all of those involved, and when ESG controversies like these come into play, they not only damage the reputation of the companies involved but more importantly, also raised broader concerns about the credibility of corporate sustainability claims. More and more, this highlights the importance of transparency and honesty in communicating environmental initiatives and no company should be exempt from this.
ESG controversies: Human rights
Last but not least, let’s consider the human ESG controversies that have continued to plague global supply chains. Of course, mining companies are a usual culprit, and Rio Tinto – the major mining company – is no exception to this rule. Throughout this period, it was still dealing with the fallout of allegations of human rights abuses at one of its overseas operations. In short, reports were surfaced that the company had forcibly displaced indigenous communities thanks to the destruction of the Juukan Gorge caves, a 46,000-year-old Aboriginal heritage site, without adequate compensation or consultation, violating both local laws and international human rights standards.
The tech giant Apple finds itself once again on this list, facing renewed criticism for labour conditions at its suppliers’ factories, with allegations of workers facing excessive hours and poor working conditions. Next comes Nike. Thought it’s fair to say that this household name has been trying to get to grips with its human rights challenges in recent years, despite these efforts, it has faced accusations of forced labour in its supply chain, specifically in regions with reported human rights abuses.
One thing is absolutely crystal clear from where we stand, the failure of these companies to address these issues adequately has led to widespread condemnation and calls for greater accountability, all of which highlights the importance of respecting human rights as a core component of ESG considerations and the need for companies to engage meaningfully with affected communities.
The way forward in light of these ESG controversies
The alarm bells were most certainly ringing in 2023 and on into 2024 with these ESG controversies. As a result, one thing is blindingly obvious – with increased stakeholder pressure, superficial approaches to corporate responsibility are no longer tenable. Yet even now and despite all of this, many companies are struggling to fully integrate ESG considerations into their core business strategies as they grappled with ESG integration across global boardrooms according to our sources. But there’s a silver lining here, and its that these ESG controversies have catalysed important conversations and are driving genuine change in some quarters. Perhaps we’re on the cusp of a new era of corporate accountability as stakeholders continue to demand better corporate behaviour.
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