In recent years, the concept of Environmental, Social, and corporate Governance (ESG) investing has gained tremendous traction. Not only does it offer opportunities to generate sustainable returns, but it also enables investors to make a positive impact on society and the environment. However, to truly understand the value of ESG, we need to shift our perspective and consider the 'new' stakeholders that are becoming increasingly crucial in this space. In this blog post, we’ll also delve into the challenges of the current ESG rating systems and discuss how AI is transforming the ESG landscape.

Broadening the ESG landscape: Emergence of new stakeholders

Historically, financial analysis has primarily focused on the impact of a company’s actions on its shareholders. Today, however, this view is expanding to include a more diverse array of stakeholders, thanks to ESG analysis - groups that are vital for a company's long-term prosperity. The environment, local communities, government authorities, regulators, NGOs, and journalists now take center stage as new stakeholders in the ESG dialogue.

The environment, for instance, is a stakeholder that companies can no longer afford to ignore. Overexploitation and neglect have led to climate change, thus, the depletion of vital resources and biodiversity, jeopardizing the long-term viability of many businesses. The recognition of the environment as a stakeholder underscores the necessity to balance economic growth with sustainable practices.

Similarly, local communities provide the workforce that companies rely on and need to respect their social environments and fundamental human rights. Governments, often viewed solely as tax collectors, are also stakeholders, providing key services like infrastructure, safety, and the rule of law. Finally, NGOs and journalists, tasked with safeguarding the general interest, ensure transparency and accountability, holding companies to their ESG commitments.

The problem with current ESG ratings

As companies grapple with these complex and interconnected issues, ESG ratings have emerged as a tool to gauge their sustainability efforts. However, these ratings aren't without their flaws.

Firstly, there is a notable divergence of opinion between rating providers, which can lead to confusion and inconsistency. Different providers may emphasize different aspects of ESG, leading to disparate ratings for the same company.

Secondly, most ESG ratings are based on self-reported data, creating an inherent risk of bias or selective reporting. It’s like allowing students to write and grade their own exams, which isn’t ideal for a system aiming to bring transparency and objectivity.

The power of AI in ESG risk assessment

To overcome these challenges, a new player is emerging in the field: Artificial Intelligence (AI). Through Natural Language Processing (NLP) algorithms, AI can analyze billions of documents from a wide range of sources to provide a more objective and comprehensive view of a company's ESG performance.

These AI-driven tools, like those developed by SESAMm, can scan a plethora of information, from press articles and social media posts to reports from NGOs, local press, and governmental bodies. They can detect ESG controversies, positive events, and sentiments linked to various ESG issues. This results in a more detailed and accurate picture of a company's ESG framework that surpasses what current ratings offer.

By bridging the gap between traditional ESG ratings and actual on-the-ground impact, AI provides a novel and powerful tool for investors and companies alike. It fosters a more holistic approach to sustainability, one that takes into account the increasingly complex web of direct and indirect stakeholders.

The future of ESG

In the grand scheme of things, the integration of AI into ESG analysis marks a significant leap forward. By acknowledging the role of new stakeholders and addressing the shortcomings of current ESG ratings, AI is reshaping our understanding of sustainable investing. The road ahead is exciting and promising, and there's no better time than now to harness the power of AI for a more sustainable and inclusive future.

Reach out to SESAMm

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Forced labor remains among the most pressing human rights challenges for companies worldwide. Despite stronger regulations and corporate pledges, millions remain trapped in exploitative conditions,  often deep within complex global supply chains.

As new laws increase scrutiny and liability, the cost of blind spots is rising. Investors, corporates, and private equity firms alike must now demonstrate active due diligence or face legal, financial, and reputational consequences.

In this whitepaper, SESAMm explores:

• The tightening global regulatory landscape on forced labor
• Exclusive data-driven insights from SESAMm’s AI platform on labor-related controversies
• Real-world case studies revealing how risks can remain hidden despite compliance efforts

Download the report to learn how data and AI are transforming the fight against forced labor - and how organizations can move from reactive to proactive risk management.

As 2025 kicks off, we stopped to take a look at the significant environmental, social, and governance (ESG) controversies of 2024, as we do every year. In this article, we dive into the three public companies with the most controversies for each pillar: environmental, social, and governance, analyzing the companies and the wider impact of the controversies themselves. Join us as we analyze these key moments that have not only influenced public opinion but also shaped the future of responsible business practices.

ESG Risks: Focus 2024

Starting with environmental risks, biodiversity and ecosystems, climate change, waste management, and atmospheric pollution emerged as the most scrutinized sub-risks in 2024. These issues were primarily tied to greenwashing, such as the Mercer Super case and energy companies' expansions at the expense of climate change.

Meanwhile, for social controversies, working conditions and fundamental human rights took center stage. Notably, some companies were linked to forced labor, while coffee supply chains were linked to child labor. Boycotts over the war on Gaza have also been a major highlight of 2024.

Finally, for governance, fraud and legal investigations have been a big driver of controversies, mainly linked to financial fraud cases. This was followed by terrorism financing linked to the war on Gaza, as well as corruption and bribery charges.

Environmental Controversies: Top 3 Public Companies

Shell

In 2024, Shell faced a host of environmental controversies, particularly through its Nigerian subsidiary, Nigeria Delta, which was implicated in serious water pollution due to oil spills. The company dealt with several other notable controversies, including a €15 million compensation related to the spills, a New York City lawsuit over climate change, and a landmark emissions ruling from a Dutch court. Additionally, the company faced condemnation from U.S. lawmakers for alleged greenwashing practices, a carbon credit scandal, and a water contamination lawsuit resolved with a  $230 million settlement.

ExxonMobil

2024 was a challenging year for ExxonMobil. First, its Hammerhead project was hit by an FDA-required Environmental Impact Assessment to evaluate the potential ecological risks. Then, conflicts with Venezuela arose over environmental concerns, followed by several U.S. lawsuits. California, Kansas, and Puerto Rico all sued the company for issues ranging from global plastic pollution and greenwashing to trade law violations. Additionally, ExxonMobil was targeted in a climate lawsuit and faced ongoing fallout from the 1989 oil spill. Protests from groups like CalPERS and student activists highlighted dissatisfaction with ExxonMobil’s environmental practices, emphasizing the company's broad regulatory and public relations challenges.

TotalEnergies

Coming in at number three, TotalEnergies dealt with several environmental controversies, notbably protests related to its East African crude oil pipeline project in Tanzania and Uganda. The company has also been accused of greenwashing and misleading sustainability claims while struggling with oil leaks at its Donges refinery and Egina field. On top of these environmental controversies, TotalEngeries faced key governance and social controversies, including a $48 million fine by the U.S. Commodity Futures Trading Commission (CFTC) for attempting to manipulate the European gasoline market in March 2018. There are also ongoing investigations into an attack in Mozambique.

Social Controversies: Top 3 Public Companies

Boeing

In 2024, Boeing faced significant challenges due to safety concerns and production controversies, which have fueled employee unrest and public skepticism. Recent incidents, including a missing door plug attachment on a Boeing 737 Max and investigations into quality control lapses at Boeing and its supplier Spirit AeroSystems, have eroded trust among small businesses reliant on the manufacturer. Whistleblower testimonies and increasing scrutiny from Congress and the FAA highlight systemic safety failures. These developments suggest a difficult path ahead for Boeing as it works to regain credibility amid ongoing struggles.

Pfizer

In 2024, Pfizer faced scrutiny after EU documents revealed over 4.9 million adverse events and 3,280 deaths linked to its COVID-19 vaccine, especially among women and individuals aged 31-50. Critics allege Pfizer continued distribution despite knowing the risks, questioning the EMA's approval. Additionally, DNA contaminants, including carcinogenic SV40 sequences, have been reported in the vaccines. A whistleblower disclosed that Pfizer employees were offered a "separate" COVID vaccine, raising concerns about access inequality. Kansas has filed a lawsuit accusing Pfizer of misleading the public about vaccine safety; meanwhile, the company faces fines in the UK for excessive pricing of an anti-epileptic drug.

Meta

In 2024, Meta faced intense scrutiny and legal challenges due to multiple controversies, including a significant data breach, allegations of failing to protect children, and privacy concerns. The company settled a $1.4 billion lawsuit related to facial recognition practices and was fined $220 million by Nigeria for violating data laws. Additional lawsuits from school districts and the Consumer Protection Association highlighted issues related to social media addiction and mental health impacts on teenagers.

Governance Controversies: Top 3 Public Companies

Alphabet

2024 was a legally challenging year for Alphabet, facing numerous antitrust issues globally. For instance, Allegro sued Alphabet for $568 million over anti-competitive practices, and the U.S. Justice Department accused Google of monopolies in the search engine and Android app markets. It has also faced an antitrust ruling, which it plans to appeal. In Europe, Google was scrutinized under the Digital Markets Act and fined 71 million euros in Turkey for anti-competitive behavior. Additionally, France imposed a $271 million fine on Google for using news content without publisher consent, and India began investigating Google's gaming app policies. These incidents highlight Alphabet’s ongoing regulatory battles across multiple continents.

Meta

2024 was not only full of social controversies for Meta. The company also encountered governance challenges across multiple jurisdictions. In Europe, Meta faced hefty fines totaling over €1 billion for a data breach and violating EU antitrust rules, alongside investigations for non-compliance with the Digital Markets Act. The company was also involved in a lawsuit from the AMI media association over advertising practices and investor lawsuits linked to the Cambridge Analytica scandal. In South Korea, Meta was fined $15 million for collecting personal information illegally, and in Ireland, a €91 million GDPR compliance fine was imposed. In addition, further complications arose from EU investigations into potential election interference and foreign disinformation. On top of that, Meta faced new lawsuits in Japan over fake advertisements, illustrating the global extent of its legal and regulatory challenges.

Apple

2024 saw Apple wrestling with significant legal and regulatory issues worldwide. The Democratic Republic of Congo accused Apple of using conflict minerals, raising ethical sourcing concerns. In Europe, Apple settled for $14.4 billion over illegal tax benefits and faced a $2 billion EU antitrust fine related to Spotify. Additional investigations included non-compliance under the EU's Digital Markets Act, anti-competitive probes in Spain, and a UK class action over monopolistic data storage practices. In Brazil, Apple was required to remove restrictions on in-app payments. The company also settled a lawsuit involving an iTunes gift card scam and contended with a patent infringement lawsuit in China from Shanghai Xiao-I, highlighting Apple's extensive legal challenges in its global operations.

Conclusion

In conclusion, the controversies surrounding environmental, social, and governance issues in 2024 have underscored the urgent need for accountability and transparency within corporations. As these companies grapple with significant backlash and legal challenges, it is clear that stakeholder expectations are evolving. The demand for responsible practices is louder than ever, and the consequences of neglecting these issues can be severe, impacting not just public perception but also financial stability and sustainability.

SESAMm’s AI Technology Reveals ESG Insights

Discover unparalleled insights into ESG controversies, risks, and opportunities across industries. Learn more about how SESAMm can help you analyze millions of private and public companies using AI-powered text analysis tools.