Stockholm (NordSIP) – According to ISS ESG’s annual analysis of the state of adherence by companies the world over to ESG criteria, ESG Review 2019, reported controversies were up 40% in 2018.
“This exemplifies a growing misalignment of corporate practices with stakeholder expectations that are grounded in UN Global Compact and the OECD Guidelines for Multinational Enterprises,” explains the report. According to Robert Hassler, Managing Director with ISS ESG, “this is not surprising and stems from both corporate failures to prevent and mitigate harm and growing public awareness and scrutiny of corporate activities and escalating standards around responsible business conduct.”
Over half of the controversies were caused by failures to respect human and labour rights together, a problem particularly prominent in South East Asia. “China, India, Indonesia and Cambodia are also in the top five locations for supply chain labour rights controversies,” says the report. Discrimination and inequality controversies increased by 72% from 2017, according to the report. According to the report, “women are still far from breaking the glass ceiling in many of the sectors in which diversity has been identified by SASB as a material issue. In most of these sectors, the average proportion of women in executive management teams is around 15%, with a range from 7% for Semiconductors to 26.6% for Healthcare Facilities & Services.”
The most environmentally exposed industries were Materials companies (22%), Energy (20%) and Utilities (15%). Regarding the S in ESG, Materials companies were also leading offenders (18%), followed again by Energy (12%) and Capital Goods companies (10%). Controversies around governance were most prominent within Banks (17 percent), Capital Goods (15%) and Pharmaceuticals & Biotechnology (9%). Geographically, 19% of ESG controversies were observed in the USA, followed by Brazil, India and Indonesia (4% each).
However, not all was bad news. Indeed, according to the report, “the share of companies covered by ISS’ Corporate Rating and assessed as “good” or “excellent” (both assessments lead to Prime status) now standing at 20.4%, up from just over 17% in the previous year.” Sectorally, 28.2% of Prime companies came from the households & personal products industry, followed by Semiconductors (26.7%) and Electronic Devices & Appliances (21.7%). “In the Corporate Rating, the top-3 companies in the Financials/Commercial Banks & Capital Markets industry are NIBC Bank, ABN Amro Group, and Raiffeisen Bank International,” according to the report.
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