SESAMm Launches Controversy Exposure Score: A New Era for ESG Risk Analysis
September 12, 2024
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5 mins read
We are excited to announce the launch of SESAMm’s proprietary Controversy Exposure Score (CES), a new score designed to transform how ESG and finance professionals assess risks. The CES offers a dynamic, real-time view of a company's exposure to ESG controversies, enabling fast, informed decision-making.
What is the Controversy Exposure Score (CES)?
The CES is a continuously updated score ranging from 1 to 100, reflecting a company or project's evolving exposure to ESG controversies. Leveraging SESAMm’s proprietary Intensity and Volume Scores, the CES captures both the severity and frequency of ESG incidents, allowing stakeholders to monitor and understand risks as they develop. Below, we’ve put together an example demonstrating how the CES for Renault compares to Stellantis based on their respective ESG controversies. As we see in the chart below, Renault has had fewer high–intensity events, which results in a lower, more stable CES compared to Stellantis.
Renault CES
Stellantis CES
How Does It Work?
The CES is powered by state-of-the-art Large Language Models (LLMs) that filter and analyze content from our data lake containing over 25 billion articles. Two main components impact the score’s value:
Intensity Score: Measures the severity of each ESG incident, considering its impact on a company’s reputational, stakeholder, financial, and legal standing. This score is derived from a Large Language Model (LLM) fine-tuned by SESAMm’s experts and trained on thousands of humanly annotated events.
Volume Score: Assesses the number of articles associated with an event, calculated using a short-term rolling window. To ensure accuracy, the Volume Score is normalized against the average article volume concerning the company and relevant ESG topics over the past year, reducing potential bias.
Track ESG controversy trends: Evaluate how a company’s risk exposure has evolved. The CES is updated daily, ensuring that users have the most current data at their fingertips.
Benchmark companies against their peers: Compare a company’s risk exposure to its peers, providing a comprehensive view of its relative risk.
Ready to Transform Your ESG Analysis?
For more information on how the Controversy Exposure Score can help you make smarter, data-driven decisions and to see it in action, request a demo.
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TextReveal’s web data analysis of over five million public and private companies is essential for keeping tabs on ESG investment risks. To learn more about how you can analyze web data or to request a demo, reach out to one of our representatives.
With 2023 drawing to an end, we wanted to share the most relevant ESG controversies during the year. In this article, we provide a comprehensive overview of the year's top ESG controversies, breaking them down into the three pillars of ESG: Environmental, Social, and Governance. Through our research, we will explore each of these areas in detail, shedding light on the most talked-about controversies and the companies involved.
Methodology
To gain a comprehensive understanding of the ESG risks in 2023, we conducted a thorough analysis of web mentions related to SESAMm’s ESG taxonomy across our expansive data lake with 20B+ articles. This allowed us to evaluate the overall volume of mentions related to each risk category: Environmental (E), Social (S), and Governance (G).
ESG Risks Over Time
Before diving into the details, we looked into the main trends over the last few years in ESG trends. We found a detectable increase in the volume of ESG-related web mentions, with an emphasis on social risks. Especially since the start of 2020, social risks have been on a consistent upward trajectory. Notably, there was a significant spike in mentions around mid-2020 following mass protests amid the COVID-19 lockdown, in addition to reports of cyberattacks and allegations of sexual assault. Furthermore, 2021 saw an uptick in mentions related to issues of racism (Black Lives Matter movement) and homophobia.
Figure 1: ESG risks over time.
ESG Risks: Focus 2023
We outlined the prominent risks in 2023: social risks, with layoffs and strikes gaining attention; environmental risks, marked by wildfires and oil spills; and governance risks, where tax evasion and ethical violations like bribery were in focus. Each risk category underscores the urgent issues facing society and the need for accountability and action.
Figure 2: ESG risks in 2023.
Environmental Controversies of 2023
Environmental risks may not match the sheer number of mentions that social risks receive, but their presence in discussions has steadily grown over the year, particularly in the third quarter. Let's explore the most common controversies that have emerged.
Climate Change and Policy
Climate change dominated environmental discussions in 2023. A noticeable peak in mentions arose in the latter half of the year, particularly around heatwaves and debates surrounding climate policies.
Atmospheric Emissions
September saw increased discussions about atmospheric emissions, notably due to the emissions from volcanic eruptions, hybrid cars, and the discovery of toxic metals in food products.
Impact on Biodiversity
The wildfires that spread in June sparked significant debates around their impact on biodiversity, leading to increased mentions and concerns related to environmental preservation.
Figure 3: Top environmental sub-risks in 2023.
Top 5 Environmental Controversies
These controversies are ranked by relative volume*.
Marathon Petroleum
Volume of mentions: 62
Relative volume: 69%
A significant portion of environmental risk discussions surrounding Marathon Petroleum was due to its chemical leak in Garyville. This incident led to massive fires, so large they could be observed from space. (source)
Nestlé
Volume of mentions: 30
Relative volume: 54%
Nestlé faced scrutiny in 2023, with over half of its environmental risk mentions associated with drought controversies. The company was urged to cease its water mining activities following severe droughts in France. (source)
Coca-Cola
Volume of mentions: 178
Relative volume: 53%
Coca-Cola garnered attention due to a hydrochloric acid leak in January 2023, leading to significant environmental concerns. (source)
ExxonMobil
Volume of mentions: 571
Relative volume: 31%
Exxon, along with Guyana’s environmental agency, was implicated in breaches of oil spill insurance policies. (source)
Shell
Volume of mentions: 872
Relative volume: 23%
An oil spill from a Shell pipeline adversely affected farms and a river in a region of Nigeria already grappling with pollution. (source)
Social Controversies of 2023
Social risks have taken the forefront in 2023, with notable web mentions increasing significantly. Here are the most relevant controversial topics:
Social Dialogue
Social discourse intensified at the start of the year, with news of widespread strikes in various sectors, including aviation and education, primarily driven by pay disputes. The wave of layoffs in several tech companies was the talk of the town, especially during the first quarter of the year.
Discrimination against minority groups, including the LGBTQ community and people of color, and age-based discrimination became a significant topic of discussion in 2023.
Figure 4: Top social sub-risks in 2023.
Top 5 Social Controversies
These controversies are ranked by relative volume*.
McDonald's
Volume of mentions: 8,903
Relative volume: 87%
McDonald's faced substantial social risks in 2023 due to significant layoffs of its corporate staff in April. The move led to public concern and discussions around the company's employment practices and stability. (source)
Google
Volume of mentions: 13,504
Relative volume: 43%
Google found itself in the spotlight as it faced challenges related to major layoffs in January and October of 2023. These layoffs contributed to almost half of the social risk mentions associated with the tech giant. (source)
Meta
Volume of mentions: 10,965
Relative volume: 38%
Meta, formerly known as Facebook, also faced scrutiny as 38% of the company's social risk mentions revolved around layoffs that took place in March and October 2023. (source)
Microsoft
Volume of mentions: 6,060
Relative volume: 28%
Microsoft faced challenges due to disruptions caused by cyberattacks in early June. In addition, the company had to navigate through controversies related to layoffs, contributing to its social risks. (source)
X (formerly Twitter)
Volume of mentions: 7,246
Relative volume: 8%
X/Twitter experienced a global outage, which was followed by significant layoffs. These events led to considerable public discussions and social risks for the company. (source)
Governance Controversies of 2023
Governance risks, though often overlooked, play a pivotal role in shaping corporate responsibility and ethical conduct. In 2023, several governance controversy trends emerged:
Money Laundering
Tax evasion was a major topic of discussion in the first quarter, highlighting the need for greater transparency and accountability within corporations.
Bribery
There was a significant increase in mentions related to bribery cases, underscoring the challenges in maintaining ethical governance standards.
These controversies are ranked by relative volume*.
FTX
Volume of mentions: 8,085
Relative volume: 40%
FTX, a notable entity in the financial sector, found itself at the center of governance controversies. A significant portion of the discussions surrounding FTX's governance risks in 2023 pertained to allegations of its founder's involvement in bribery schemes. (source)
Apple
Volume of mentions: 3,162
Relative volume: 28%
Apple, a tech giant, faced scrutiny as a third of its governance risk mentions revolved around antitrust violations reported in October 2023. (source)
Microsoft
Volume of mentions: 4,429
Relative volume: 25%
Microsoft encountered legal challenges with its deal with Activision. The company had to approach the court to reject the FTC's request to halt the deal. (source)
X (formerly Twitter)
Volume of mentions: 2,251
Relative volume: 18%
X/Twitter, another major player in the tech industry, faced legal challenges when a judge dismissed a shareholder lawsuit against Elon Musk concerning a Twitter buyout. (source)
Google
Volume of mentions: 3,920
Relative volume: 13%
Google faced judicial sanctions for allegedly destroying evidence in an antitrust case, further emphasizing the critical governance challenges even major tech giants face. (source)
Conclusion
In conclusion, the year 2023 proved to be eventful in the ESG landscape. From environmental concerns sparked by significant events like chemical leaks and wildfires to social challenges such as widespread layoffs and discrimination and governance risks underscored by bribery and antitrust violations, the year offered a comprehensive view of the myriad challenges companies face in the modern era.
Understanding these controversies and the companies involved provides invaluable insights for stakeholders, especially in the private equity and asset management sectors. AI-driven ESG insights, like those provided by SESAMm, can be pivotal in navigating the ever-evolving ESG landscape, ensuring informed decision-making and proactive risk management.
Relative volume*: Relative to the total volume of E, S, or G risks for the company during the same period.
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.
This is from SESAMm’s Deal Screening AI report. These reports are usually used by private equity deal teams and M&A teams to conduct pre-commercial due diligence on any company or project in minutes, and they contain insights and risks on the target company as well as a full competitive and market analysis.
ManTech International Corporation is a U.S.-based defense contractor specializing in cybersecurity, data analytics, and systems engineering solutions for national security and government agencies. Founded in 1968 and headquartered in Herndon, Virginia, the company operates globally. It primarily serves U.S. defense, intelligence, and homeland security clients, delivering technology services that support mission-critical operations such as cybersecurity protection, artificial intelligence and analytics, and intelligence, surveillance, and reconnaissance capabilities.
The broader defense and intelligence services market in which ManTech operates is expanding rapidly due to rising global defense spending, geopolitical tensions, and increasing demand for advanced digital and cyber capabilities. Within this context, ManTech has recently secured several growth signals, including a $200 million cybersecurity contract with the National Oceanic and Atmospheric Administration, partnerships to deploy secure AI technologies, and major analytics and systems contracts with the U.S. Army, reflecting continued demand for its technical expertise.
The report identifies several legal and reputational risks that could be relevant in a due diligence context. The most significant relate to labor and human rights issues, including allegations by former employees that the company confiscated passports and imposed hazardous working conditions under a U.S. Army contract in Kuwait, with a U.S. court allowing human-trafficking claims to proceed. Other previous issues include whistleblower retaliation claims linked to military contract billing practices and a civil fraud settlement involving misrepresentation of security clearance status. Environmental risks appear limited, with no major pollution or climate-related incidents identified.
In the competitive landscape, ManTech operates alongside firms such as Booz Allen Hamilton, Leidos, CACI International, SAIC, and General Dynamics Information Technology. While not the largest player in the sector, it is regarded as a capable provider of secure IT and cybersecurity solutions for classified government missions. Overall, the report concludes that ManTech benefits from strong demand for defense technology and cyber capabilities but faces reputational exposure primarily tied to labor practices and contract-related compliance risks.
Reach out to SESAMm
SESAMm’s AI Deal Screening Reports analyze web data across over five million public and private companies to help investors quickly identify legal, ESG, and reputational risks during due diligence. To learn more about how you can generate these reports or to request a demo, reach out to one of our representatives.
Juliette Fafa and Thibaut Gunsey will join the conference virtually. Feel free to reach out to them and schedule a meeting to learn more about our ESG technologies.
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