The “perfect storm” of environmental, social and corporate governance (ESG) activism we discussed in a previous blog rages on, impacting both public and private companies across multiple sectors. Activism in the energy sector is escalating and a variety of stakeholders are demanding improved ESG performance across supply chains and from numerous industries.
Oil and Gas Sector Scrutiny Escalates
Many of the significant examples of shareholder ESG activism have involved global energy majors such as Exxon and Shell. Activism in the energy sector reached a new peak with the recent announcement of personal litigation against Shell's directors. Shareholder pressure and the looming prospect of mandatory climate disclosure is extending across the value chains of energy companies, with increased demands on suppliers and partners for credible and rigorous ESG data.
Multiple Sectors Being Held Accountable
As governments across the globe rapidly move toward mandatory ESG disclosure and with the recent announcement of mandatory ESG disclosure requirements coming to Canada, multiple sectors including agriculture, food and consumer goods have come under scrutiny for their ESG impacts. Costco's shareholders recently voted in favour of a proposal that called on the retailer to set credible net-zero targets and tackle Scope 3 emissions in its supply chain. After Unilever satisfied its investors in 2021 with its plan to achieve net-zero across its supply chain by 2039, the company continues to face ESG-related pressure from activist shareholders, most recently related to its offering of healthy food options.
Employees Push for Progress
In addition to shareholder activism, employee activism on ESG issues is on the rise, especially around climate change and employment practices. Understandably, risks and opportunities around a just energy transition and climate resilience are of significant concern to employees. A movement initiated in 2019 by Amazon employees related to the company's lack of action and planning on climate change has served as an example and inspiration for similar movements at other companies. According to PWC's 2021 Consumer Intelligence Series survey on ESG, “55% of business leaders said their companies are stepping up investments in climate change action; [yet] only 36% of employees agreed,” setting the stage for ongoing employee activism across all sectors. Conversely, tangible action on ESG issues can positively impact workforce attraction and retention, as 84% of employees included in the survey indicated that “they were more likely to work for companies that stand up for environmental issues.”
How Can You Prepare?
Regardless of the sector you're in, the rise in shareholder and employee ESG activism could leave you vulnerable if you have a subpar ESG strategy. The mandatory ESG disclosure coming to Canada will likely have a ripple effect throughout the economy and could lead to possible litigation or regulatory enforcement for companies that fail to meet disclosure requirements.
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