Key news in this edition:
- Shareholders demand action over labour standards in sugar supply chains.
- Companies drop climate action targets from executive pay structures.
- SBTi proposes new incremental carbon removal targets.
Editorial
In March, corporate responses to ESG challenges showed widening divergence amid shifting political and regulatory landscapes. Labour rights again came into focus following a New York Times investigation into sugar plantations in India. The report uncovered child labour, debt bondage and coerced sterilisation, implicating multinational buyers including PepsiCo through indirect sourcing links. Shareholder resolutions soon followed, calling for human rights due diligence. However, PepsiCo declined to issue a report, citing SEC materiality thresholds and distance from its suppliers, exposing the limitations of current transparency frameworks.
Meanwhile, in the US, JP Morgan Chase announced it would rename its diversity, equity and inclusion (DEI) programme to "diversity, opportunity and inclusion". The decision, accompanied by a reduction in DEI training, echoed a broader rollback of such initiatives across corporate America. This shift aligns with political efforts led by former President Donald Trump to dismantle institutional DEI policies, signalling how external pressures are reshaping corporate priorities. Similar hesitations emerged in climate governance. Although 80 percent of companies on track to meet climate goals have linked executive pay to emissions targets, a Nature Climate Change study found 40 percent of firms either failed to meet their 2020 targets or ceased reporting them entirely. Some are now removing climate metrics from remuneration frameworks, raising concerns that ESG-linked incentives are being weakened just as accountability is most needed.
Amid these tensions, the Science Based Targets initiative (SBTi) proposed draft updates to its Corporate Net-Zero Standard. The guidance introduces interim targets for carbon dioxide removals tied to Scope 1 emissions, with phased implementation beginning in 2030. However, the exclusion of Scope 3 emissions – often the largest share of a company’s footprint – has drawn criticism for potentially undermining the framework’s ambition. The finalised standard, expected later this year, could significantly influence corporate decarbonisation strategies and voluntary carbon markets.
Environmental governance was further tested in February when a tailings dam collapsed at a copper mine in Zambia, spilling toxic waste into the Kafue River. The mine, owned by a subsidiary of China Nonferrous Metal Mining, caused widespread ecological damage and disrupted water access for millions. The incident highlights the risks of rapid critical minerals development in jurisdictions with limited regulatory oversight and the importance of international standards and investor accountability in preventing similar events.
Together, these developments point to a pattern of regulatory, investor, and public pressure confronting inconsistent or diluted ESG practices. While ESG remains a focus for many companies, the challenges of political pushback, weak enforcement mechanisms, and limited global standardisation are testing the resilience of voluntary commitments.
Shareholders demand action as reports of labour abuses emerge in sugar supply chains
In March, we have continued to see differing examples of how companies are responding to ESG-related policy and geopolitical changes. JP Morgan Chase & Co (‘JP Morgan’), the New York-based financial institution, announced that it was changing the name of its diversity, equity and inclusion program (‘DEI’) to diversity, opportunity and inclusion. This change comes amid US President Donald Trump’s array of executive orders and statements aimed at removing DEI initiatives from government offices and public institutions. In reaction to these developments, several government agencies and private corporations across various sectors have begun reevaluating their DEI commitments. Some institutions have removed DEI references and resources from their websites, while others have disbanded dedicated DEI teams or scaled back related initiatives. Consistent with this emerging trend, JP Morgan also announced plans to reduce its DEI-focused training sessions, reflecting a broader industry-wide reassessment.
Conversely, at the International Bar Association’s Latin American regional forum, held in Peru, companies reported that they are encouraging their in-house legal teams to take on more pro-bono work as a way to meet the business’ wider ESG goals. At the forum, representatives from companies and law firms discussed what they are doing to improve their unique pro bono outputs and how they measure their impact.
So what?
These two examples provide contrasting responses as to how companies across various industries and locations are responding to ESG and DEI initiatives amid larger-scale policy and geopolitical changes, in large part spurred by the current US administration. As political, macroeconomic and regulatory environments continue to shift, corporations’ and companies’ responses will continue to evolve. While some are doubling down and pushing forward with more assertive strategies, others are toning down programmes and rhetoric as they look to find a formula that works for them.
[Contributor: Haddie Hamal]
Companies drop climate action targets from executive pay structures
For many years companies have faced growing pressures to integrate net-zero climate commitments into their strategies. One method to do this has been by aligning executive remuneration with climate-related goals. While executive remuneration can be a lever to drive financial performance, the integration of climate-related targets has been slowly integrated into executive performance KPIs to better align corporate sustainability goals and accountability with financial performance.
According to a recent study published by the Carbon Disclosure Project, an environmental disclosure NGO, 80 percent of companies that are on track to meet their climate targets now link executive pay to achieving these goals, effectively demonstrating the power of using governance and strategic action to underpin progress on environmental targets. While some progress has been made towards achieving these long-term goals, corporate sustainability strategies generally still face some real challenges, specifically, a large accountability gap.
Although companies are increasingly announcing emissions targets, Nature Climate Change found that 40 percent either failed to meet their 2020 targets or simply quietly stopped disclosing their performance with very little consequence or changes in public sentiment, environmental scores and environmental-shareholder proposals. The apparent lack of accountability we see with voluntary, self-imposed corporate sustainability targets highlights the gap that can be filled by linking climate-related factors with executive pay to drive real accountability and impact. However, there have been criticism that the penalties for lack of progress are often not meaningful or enforced, and that linking executive pay with climate targets is ineffective, and can, in some cases encourage executives to make misleading claims about environmental progress.
Despite the potential power of integrating climate-targets into incentive schemes, many global companies from various industries have started to backtrack from climate goals, dropping them entirely from executive pay plans or pushing back plans to decarbonize their operations. Although some of these companies have removed explicit language linking bonus pay to climate change commitments, some have retained broader ESG ambitions such as employee support, environment, safety and community enrichment.
So what?
The removal of climate goals from executive pay plans comes at a time when ESG regulations and strategies are facing increasing opposition. The current shifting landscape of ESG indicates a growing need for climate goals to be clearly defined and linked to practical implementation strategies which not only incentivise progress in the short-term but also foster a long-term culture of accountability. While the recent backtrack in ESG standards may discourage companies’ willingness to set climate targets, sustainability will remain a priority for investors and the public. Companies are having to decide whether to continue to formalise climate-related incentives or retreat from previous commitments amid shifting political sentiments.
[Contributor: Boitumelo Mogale]
Shareholders demand action over labour standards in sugar supply chains
In December 2024 the New York Times and Fuller Project investigation exposed “brutal” working conditions on sugar plantations in Maharashtra, western India. These abuses included child labour, rampant debt bondage, and even cases of women sugarcane cutters being pressured into unnecessary sterilisation surgeries. As a result of the investigation some of the largest food and beverage multinational corporations, including PepsiCo, Coca-Cola, and Mondelez International, were named in the reporting as having allegedly bought sugar from the plantations implicated in such abuses. In light of these allegations, shareholders demanded greater supply chain accountability from the corporations. Activist investors filed resolutions urging companies to investigate and address labour standards in their sugar suppliers. At PepsiCo, a shareholder proposal – led by BNP Paribas Asset Management and Mercy Investment Services – called for a report on how the company upholds human rights across its sugar supply chain in India, explicitly citing the New York Times findings.
In a filing to the U.S. Securities and Exchange Commission (SEC), PepsiCo argued that its India sugar operations are economically insignificant – less than 5 percent of its total assets, sales, and earnings – and thus not “material” to the business under SEC rules. The company noted it does not directly purchase sugar from India, relying instead on independent local bottlers, effectively claiming the reported abuses fall outside its immediate supply chain. This use of the SEC’s 5 percent threshold allowed PepsiCo to avoid publishing the requested human rights report.
So what?
The New York Times report shines a light on some of the grievous human rights and labour rights issues in the supply chains of the world’s largest food and drinks corporations. The calls for accountability by the investors in these corporations highlights the significance of the problem, and thus the need for greater transparency in global supply chains.
[Contributor: Nickolas Bruetsch]
SBTi proposes new incremental carbon removal targets
On 18 March 2025, the Science Based Targets initiative (‘SBTi’), a standard body that validates corporate climate targets for around 10,000 companies worldwide, released a draft of its updated Corporate Net-Zero Standard (v2.0) for public consultation. The revised framework introduces new guidance on supporting carbon dioxide removal (CDR) as a key element of the transition to net-zero emissions, proposing the use of carbon removals to help companies achieve their net-zero targets. Under these updated guidelines, the SBTi outlines three options for the use of carbon removals ahead of the net-zero target date. One of these options, Option 1, requires companies to set both near- and long-term CDR targets, along with interim milestones. These targets are designed to address projected residual Scope 1 emissions – those emissions that cannot be eliminated, even after measures such as transitioning to electric vehicles or improving supply chain efficiency. Under this option, companies must gradually scale up their use of carbon removals, ultimately reaching 100-percent coverage of their projected residual Scope 1 emissions by their net-zero year. Option 2 allows companies to set supplementary carbon removal targets to address their projected residual emissions, offering recognition for these additional efforts. Option 3 allows companies to manage the final 10-percent of residual emissions through further value chain emission reductions, carbon removals, or a combination of both.
This marks a significant update to the previous version of the Net-Zero Standard. As noted by Isometric, a carbon removal registry, previously, the SBTi encouraged companies to invest in CDR through mechanisms such as Beyond Value Chain Mitigation (BVCM) – activities that reduce or remove emissions outside a company’s value chain – but did not mandate the use of removals before the net-zero target year. While the earlier standard required companies to offset all residual emissions by 2050, they could theoretically delay CDR purchases until as late as 2049. The revised guidance now clarifies that SBTi expects companies to begin scaling up CDR efforts well before the target year, with interim targets starting in 2030 at 5-percent of projected residual emissions.
The SBTi has not yet finalised which carbon removal technologies will qualify under the updated framework, but durability will be a key criterion. In particular, the SBTi proposes introducing a minimum durability threshold to ensure the long-term storage of removed carbon. Two approaches are currently under consideration: the "like-for-like" principle and the "gradual transition" model. The "like-for-like" approach requires matching residual emissions by greenhouse gas type with removals of equivalent storage duration. For example, because CO₂ can persist in the atmosphere for over 1,000 years, qualifying removals would need to demonstrate comparable permanence. In contrast, gases like methane and nitrous oxide, which have shorter atmospheric lifespans (ranging from 12 to 120 years), could be offset with removals offering shorter-term storage. Alternatively, the "gradual transition" approach proposes a phased shift from lower- to higher-durability removals between 2030 and 2050, without the need to classify emissions by gas type.
Public consultations with businesses and experts will take place before the proposals are reviewed by the SBTi’s technical committee later this year. The finalized Net-Zero Standard is expected by the end of 2025, with implementation planned for 2026.
So what?
The SBTi’s proposed changes could potentially drive demand for high-quality removal credits within the voluntary carbon markets and help scale the emerging CDR industry, which is still led by a small number of buyers. There are concerns that the proposed changes may not go far enough. Under the new guidelines, companies would be allowed to purchase carbon removals only to offset Scope 1 emissions. This limited scope has raised fears that it may not generate enough demand for durable carbon removal solutions or could significantly reduce the potential impact, especially given that most SBTi members’ largest emissions fall under Scope 3. Additionally, as noted by Carbon Herald, many large Scope 1 emitters do not have SBTi targets and often lack the financial flexibility to scale up CDR efforts early. In contrast, companies with high Scope 3 emissions typically have more financial capacity to invest in removals. The public consultation will be crucial in determining which proposed changes will be incorporated into the final standard, including the inclusion of projected residual Scope 3 emissions in near-term CDR targets, and defining removal quality standards to ensure these efforts result in meaningful climate impact.
[Contributor: Federico Ingretolli]
The potential cost of critical minerals development evidenced in Zambian tailings dam collapse
On 18 February 2025, a tailings dam collapsed at a copper mine in northern Zambia, releasing an estimated 50 million litres of toxic waste into the Kafue River, a key water source for approximately 60 percent of the Zambian population. Signs of pollution have reportedly been detected at least 100 kilometres downstream of the dam site. The mine site and associated dam are owned by Sino-Metals Leach Zambia Limited (‘SMLZ’), a Zambian subsidiary of China Nonferrous Metal Mining Co. Limited, a Chinese state-owned mining company. The Zambian Ministry of Water Development and Sanitation has reported “devastating consequences” from the collapse, including the near complete destruction of marine and bird life, and impacts on Zambian citizens who rely on the river as a source for fishing, irrigation, and water for industry.
SMLZ has reportedly apologised for the incident and has committed to restoring the affected environments. In the days following the collapse, the Zambian Air Force was deployed to release several hundred tons of lime to neutralise the acidic waste. Zambian media indicates that SMLZ was ordered to cease operations at the site until the dam and related infrastructure can be repaired and strengthened to prevent further environmental impact.
So what?
Investigations into the tailings dam collapse have only just been launched, and its causes are not yet known, however observers have cautioned that this could be an example of the potential environmental impact of exponential growth in African mining. As the world looks to Africa as a key source for critical minerals, a lack of governmental oversight and ineffective monitoring has the potential for devastating consequences for both the environment and host communities, if international mining companies are not held to account. Strong international frameworks such as the Initiative for Responsible Mining Assurance’s Standard for Responsible Mining, and the International Council on Mining and Metals Sustainable Development Framework can provide companies with clear guidance on responsible mining practices in the absence of strong local frameworks, however it may be up to international investors to enforce adherence to these principles.
[Contributor: Emma Shewell]
