Most of the ESG incidents involving BEL 20 companies are still unresolved
Press-release - Nov 13, 2024
- Use of AI and expert assessment to summarize environmental, social and governance (ESG) accusations towards Belgian companies
- Novel data platform showing unique incidents showing timeline of accusations, company response, severity, and status
- ESG accusations are evaluated based on the 10 principles of the United Nations Global Compact (UNGC) – a popular framework among BEL 20 firms: 70% of BEL 20 companies are signatories
- BEL 20 companies are involved in 38 unique incidents; 25 incidents are unresolved
- The stock market performance of former BEL 20 company Bpost exemplifies the financial implications of unresolved ESG incidents
"We combine AI and expert assessment to characterize the ESG risk events that matter for the Belgian economy. We find that, for the BEL 20 companies, the majority of the ESG risk events are unresolved, implying that the associated negative outcomes may still materialize. Awareness of these events should help decision makers to reduce adverse impacts on society."
The BEL 20 index monitors the financial performance of 20 prominent blue-chip companies listed on Euronext Brussels. Inclusion in the index brings these companies heightened visibility and frequent media coverage, including scrutiny for potential adverse societal impacts. However, repeated reporting on the same events can make it challenging for stakeholders to discern the actual number of unique incidents and and assess the timeline of occurrences. This repetition complicates efforts in due diligence, stakeholder engagement, risk monitoring, and reporting.
To address these challenges, the Brussels-based news analytics company Sentometrics has launched a comprehensive platform that consolidates and summarizes incidents with a high likelihood of adverse impacts on human rights, labor practices, environmental standards, and involvement in corruption.
The platform leverages artificial intelligence to identify adverse impact accusations within over 20 million news articles published in Belgian media since 2015. Expert reviewers then categorize these accusations into unique incidents, balancing them against company responses and assessing severity (low, medium, high) and status.
The status evaluation aligns with the ten principles of the United Nations Global Compact (UNGC) on human rights, labor, environment, and anti-corruption, which are central to any ESG (Environmental, Social, and Governance) assessment by stakeholders. Adherence to these principles has become a standard in the code of conduct for service providers to financial institutions. Currently, 14 BEL 20 companies (70%) are signatories of the United Nations Global Compact (UNGC), a significantly higher proportion than the signatory rate of less than 1% among Belgian companies overall. AB InBev and KBC were early adopters, joining in 2005 and 2006, while Sentometrics joined in 2024.
UNGC membership provides access to resources, networking, and guidance to support companies in advancing and reporting on their sustainability efforts. Equally important is the commitment to transparent, annual reporting on how these principles are integrated into business strategies, fostering accountability and strengthening stakeholder trust. For example, KBC exemplifies transparency with a comprehensive Communication on Progress (COP) and a 100% response rate to the UNGC questionnaire. Such transparency not only enhances credibility but also helps companies mitigate ESG risks and meet growing investor expectations.
Key Insights by UNGC Incident Frequency
While media coverage may suggest widespread ESG accusations against BEL 20 companies, Sentometrics has identified only 38 unique cases involving these companies. Among them, KBC Group faces the most exposure with 8 potential violations, followed by Ackermans & Van Haaren with 7 cases, and Umicore with 5 cases.
Key Insights by UNGC Principles
Across the UNGC’s four main principles (Environment, Labor, Human Rights, and Anti-Corruption), the analysis showed the following distribution among the 38 UNGC-related cases:
- Environment: 17 cases (45%)
- Anti-Corruption: 11 cases (30%)
- Human Rights: 10 cases (26%)
- Labor Rights: 2 cases (5%)
Notably, companies like Umicore, Solvay, and Elia were most frequently linked to environmental incidents, while KBC Group faced the highest number of human rights and corruption cases, though none of these were classified as high severity.
The very low number of labor rights cases can be attributed to Belgium's robust legal framework on labor rights, along with its well-established social dialogue system and strong trade union presence, which together help to mitigate labor rights risks.
Ongoing and Unresolved Risks
Of the 38 UNGC-related incidents identified, 25 cases (66%) remain unresolved, signaling either insufficient remediation, ongoing legal proceedings, or continued external scrutiny. As of October 2024, the companies most exposed to unresolved UNGC cases are Umicore with 5 cases, followed by KBC Group and Ackermans & Van Haaren, each with 4 cases.
Trends and evolving UNGC risk incidents topics
UNGC-related risk incidents are evolving, with PFAS (per- and polyfluoroalkyl substances) contamination—often called "the new asbestos"—raising serious health and environmental concerns across industries. This issue poses heightened legal risks, potential lawsuits, costly remediation efforts, and regulatory scrutiny, ensuring it remains a focal point for stakeholders and the media in the coming years.
Geopolitical and human rights risks are also expected to stay in the spotlight. The ongoing Russia-Ukraine conflict and rising tensions in the Middle East amplify human rights risks, especially for financial firms with investments in unstable regions.
Conclusion: The financial value of managing the incidents
The sheer volume of accusations can overwhelm stakeholders, making it difficult to discern meaningful patterns amidst the noise. The solution lies in identifying unique incidents and organizing accusations alongside company responses in a clear timeline. Sentometrics provides this analysis for all Belgian companies. Our analysis reveals that managing these accusations is crucial for society and the financial prospects of the company. UNGC risk incidents can become highly material, directly impacting a company’s financial performance. A prime example is former BEL 20 stock Bpost, whose poor performance can be attributed to a range of ESG-related issues over the past decade, including labor disputes, customer complaints, governance challenges, fraud, and conflicts of interest.