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ESG Engagement in 2024: Key Takeaways and Lessons Learned
ESG Engagement in 2024: Key Takeaways and Lessons Learned

March 10, 2025

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ESG Engagement Introduction

Environmental, Social, and Governance (ESG) is an increasing concern for investors, corporations, and regulators globally. As businesses navigate the evolving ESG landscape, ESG engagement has become a critical factor in formulating corporate policies, guiding investor actions, and building long-term trust among stakeholders. As the new year approaches, companies face new challenges from regulators, tech innovations, and changing stakeholder expectations. Our blog summarizes key findings from Inrate’s 2024 Engagement Report, applying lessons from the past year to inform engagement efforts in 2025.

Why is ESG Engagement Important?

ESG engagement is the active collaboration between investors and businesses to drive sustainable and responsible practices. Investors use mechanisms such as shareholder resolutions, direct dialogue, and voting rights to encourage improvements in environmental impact, social responsibility, and corporate governance.

Beyond regulatory compliance, ESG engagement is a strategic tool for fostering innovation, enhancing brand reputation, and managing financial and regulatory risks. It helps businesses improve long-term resilience, attract responsible investment, and drive measurable impacts, such as lower carbon emissions and stronger governance.

Here are the key topics explored by Inrate’s Responsible Shareholder Group in 2024 and how they have evolved:

1. Scope 3

What is Scope 3?

Scope 3 emissions include all indirect emissions from a company’s value chain, both upstream and downstream. These emissions come from the production of purchased goods and services, business travel, and the usage of sold products. Why is it Important?

  • Scope 3 is critical to achieving the Paris Agreement’s climate goals, accounting for, on average, 75% of a company’s greenhouse gas (GHG) emissions.
  • According to Inrate’s data, only 31% of firms have allocated targets to reduce Scope 3 emissions (in Inrate’s Swiss universe).
  • Mitigating Scope 3 emissions helps reduce risks associated with carbon-heavy supply chains, ensures compliance with regulations, and strengthens the economy in the long run.

Key Developments

  • Engagement on Scope 3 emissions has increased, with 24 companies recently engaged and implementing at least some Scope 3 reduction policies. However, some still lack Scope 3 reduction targets.
  • The percentage of companies that received some form of independent verification of their Scope 3 emissions and reductions increased from 50% to 67% in 2023.


 

2. Sustainable Products and Services

What is it?

Sustainable products and services help address environmental and social issues by reducing resource use, minimizing waste, and promoting accessibility. Enhancing their impact requires a life cycle approach, from design to disposal.

Why is it Important?

  • Sustainable products and services were regarded as a significant business issue by nine out of 10 companies.
  • Beyond environmentally conscious customers, they present opportunities for market expansion and cost-cutting for businesses.

Key Trends

  • Almost all companies considered this a material issue, and most met their milestones for devising policies and programs. This strengthens policy creation and program implementation, as indicated by a higher average score for 2024 compared to previous years. 40% of companies reached this milestone, up from 27% in 2023.
  • Despite increasing integration of sustainability considerations in operations, challenges remain in reporting KPIs due to a lack of tracking and assessing sustainability-related performance indicators. There are persistent gaps in defining sustainability objectives and measuring outcomes.

3. Biodiversity

What is Biodiversity?

Biodiversity encompasses life forms, habitats, and the genetic diversity of both flora and fauna. Human activity has pushed a million species to the brink of extinction. Organizations can help mitigate this risk by managing resource extraction, restoring damaged ecosystems, and adopting sustainable policies.

Why Biodiversity is Important?

The loss of biodiversity is one of the top three global threats, according to the World Economic Forum. It has the potential to destabilize entire ecosystems, economies, and social orders. The World Economic Forum estimates that more than 50% of global GDP could be at risk if the degradation of nature is not reversed by 2030.

Key Trends

  • Considering the nascency of biodiversity engagement, target achievement remains low; however, significant improvements have been observed in line with growing awareness among investors and companies.
  • Discussions reveal that many companies are unaware of their biodiversity impact. This is expected to change as improved data enhances transparency, target-setting, and monitoring in the coming years.

4. Human Rights Due Diligence

What is it?

Human rights due diligence aims to ensure that company operations or their value chains do not cause negative impacts on people or society. The United Nations (UN) and the Organisation for Economic Co-operation and Development (OECD) have established a standard framework, while countries such as France, Germany, and Switzerland have national legislation on this matter.

Why is it Important?

Human rights due diligence plays a critical role in reducing reputation damage, legal fines, and other financial repercussions. It ensures that the interests of both shareholders and stakeholders are balanced.

Key Trends

  • Companies tend to score well in the first step of the human rights due diligence management system, but fewer manage to properly implement the steps recommended by the OECD.
  • Companies often fail to report consistently on the effectiveness of their risk mitigation measures, likely due to a lack of comprehensive human rights impact assessments. While many have grievance mechanisms, few disclose reported issues or remediation actions.

5. Psychosocial Risks at Work

What is it?

This topic highlights employee mental well-being, as stress can impact both workplace outcomes and society. Psychological risks include stress, burnout, bore-out, and presenteeism—working despite illness or injury.

Why is it Important?

  • Depression in Switzerland has increased by 20% in the last five years—18% on average and 29% among young women.
  • AXA estimated that the impact of employees taking sick leave due to mental health issues leads to a GDP loss for Switzerland of around CHF 17.3 billion per year.

Key Trends

  • Awareness of the issue is growing among certain companies, but none publicly disclose how presenteeism is being addressed internally.
  • There are programs aimed at employee retention and engagement, but greater disclosure is needed regarding workplace bullying and harassment.

Conclusion

As engagement efforts continue, maintaining a long-term, consistent focus on key ESG topics remains essential for driving meaningful progress. Collaborative approaches are becoming increasingly important, with Inrate exploring an international engagement pool to address global ESG challenges more effectively.

Read more: https://inrate.com/esg-active-ownership/engagement-services/


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