Our GaiaLens Controversy Detector flagged 204 controversies from the past week. From Shell's Nigerian oil clean-up facing corruption allegations to Coca-Cola's potential plastic packaging shift amid new tariffs and controversies surrounding DEI initiatives at Goldman Sachs and Starbucks, these developments highlight the growing scrutiny on corporate accountability and sustainability. Furthermore, Kobayashi Pharmaceutical's profit plunge due to a health hazard scandal underscores the significant financial risks associated with ESG failures. These stories collectively emphasise the importance of robust ESG practices for long-term value creation and risk mitigation. Read more about each story below.

Shell's Nigerian Oil Clean-Up Plagued by Corruption

A whistleblower has revealed to the BBC that Shell ignored multiple warnings about a controversial oil clean-up initiative in southern Nigeria, which has been plagued by corruption and inefficiency. The clean-up program, launched about eight years ago and funded by several oil companies to the tune of $1 billion, aimed to restore oil-contaminated areas of Ogoniland in the Niger Delta. However, the effort has been criticised for wasting resources and failing to improve the lives of local residents, who continue to suffer from severe oil pollution.

The whistleblower claims that Shell and the Nigerian government consistently reported progress in the clean-up efforts, despite receiving numerous alerts about corruption and mismanagement. Shell maintains that it conducts clean-up and remediation efforts regardless of the cause of spills, including those resulting from illegal activities like oil theft. However, critics argue that the company's actions have not adequately addressed the environmental devastation and health risks faced by communities in the Niger Delta.

This revelation comes as Shell faces legal challenges over its role in oil pollution in Nigeria. Residents of the Bille and Ogale communities are suing Shell in the UK, alleging that the company failed to prevent or clean up spills effectively, leading to widespread environmental damage and human rights violations. The ongoing legal battles highlight the complex issues surrounding environmental responsibility and corporate accountability in regions affected by oil extraction.

According to our GaiaLens database, Shell currently has an Environmental score of 33/100 and an Environmental Impacts score of 51/100, ranking them 50th out of 101 peers in the Oil, Gas, and Consumable Fuels industry. In terms of Social scores, Shell achieves a Community score of 62/100, positioning them 38th out of 88 companies. It will be interesting to see how these recent developments influence these scores in the future.

Coca-Cola's Plastic U-Turn

Coca-Cola is considering shifting its packaging strategy in response to President Donald Trump's new tariffs on aluminium imports. The company may increase its use of plastic bottles in the US if the tariffs make aluminium cans more expensive. This decision comes after Trump announced a 25% tariff on all imported steel and aluminium, which could raise the cost of packaging for beverages like soda and beer.

Coca-Cola CEO, James Quincey, noted that while aluminium cans are more recyclable, the company has alternative packaging options, such as PET (plastic) bottles, to maintain affordability. This comes after many have criticised Coca-Cola for being the "leading global plastic polluter" for six years.

The tariffs could have broader implications for the beverage industry, particularly for companies reliant on aluminium cans. The move is part of Trump's efforts to boost domestic manufacturing by increasing costs for imported materials. However, this shift towards plastic could undermine Coca-Cola's sustainability goals, which were recently revised to include using between 35% and 40% recycled materials in packaging by 2030.

Coca-Cola currently holds an Environmental score of 58/100, ranking 38th out of 99 peers in the Beverages industry. Notably, they have a Waste Management score of 62. However, as one of the world's largest plastic polluters, this recent decision to increase plastic usage could significantly impact their Environmental scores going forward. It will be crucial to monitor how this shift affects their sustainability rankings, especially given the ongoing criticism of their plastic pollution practices.

Is DEI Under Threat? Goldman Sachs Ends Board Diversity Rule

Goldman Sachs has ended its policy requiring companies seeking to go public to have diverse boards, citing recent legal developments that have impacted board diversity mandates. The policy, introduced in 2020, initially required one diverse board member and was later increased to two, with at least one being a woman. Goldman Sachs' decision follows a December ruling by a US federal appeals court that struck down Nasdaq's ability to enforce similar diversity requirements for listed companies.

Richard Gnodde, Goldman Sachs' global head, stated that the policy had served its purpose by encouraging companies to adopt diverse boards and, therefore, is no longer necessary. Despite ending the formal requirement, Goldman Sachs has claimed they will continue to promote diverse leadership and offer services to help clients find diverse board members.

This move aligns with broader trends in the corporate world, where several major companies, including Google, Meta, and Amazon, have also scaled back their diversity initiatives. The shift comes amid increased scrutiny and legal challenges to DEI policies in the US, partly influenced by political developments. 

Goldman Sachs currently boasts a strong Diversity and Inclusion score of 78/100, placing them third out of 317 companies in the Capital Markets industry. However, this standing could be at risk if this recent news indicates a decline in the company's DEI practices. The discontinuation of their internal diversity policy may signal a shift in their approach to diversity initiatives.

Kobayashi Pharma's Profit Plunges

Kobayashi Pharmaceutical has reported its first net profit drop since its listing in 1999, with a significant decline of 50.5% to 10,067 million yen for the fiscal year ending December 2024. This downturn is largely attributed to a health hazard scandal involving its supplements containing "Beni-Koji," a type of red yeast rice. The scandal led to widespread recalls and a substantial loss of consumer trust, impacting the company's financial performance.

In response to these challenges, Kobayashi Pharmaceutical has scrapped its medium-term business plan for 2023-2025, signaling a major strategic shift. The company is undergoing significant restructuring efforts, including changes in management, to restore confidence and recover from the damage caused by the scandal.

Despite the current setbacks, Kobayashi Pharmaceutical expects its net profit to rise by 4.3% to 10.5 billion yen for the business year ending December 2025, indicating a potential recovery path. 

Kobayashi Pharmaceutical is facing additional challenges, including opposition to shareholder proposals aimed at re-examining past issues and electing new directors, which the company believes could hinder its recovery efforts. Overall, the company is navigating a critical period, focusing on rebuilding trust and stabilising its financial position.

Starbucks Sued by Missouri Over 'Discriminatory' DEI Policies

The state of Missouri has filed a lawsuit against Starbucks, alleging that the company's DEI policies constitute race and sex-based discrimination. The lawsuit, filed by Attorney General Andrew Bailey, claims that Starbucks' practices, such as linking executive pay to meeting racial and gender-based hiring quotas, violate federal and state anti-discrimination laws. It also alleges that these policies lead to higher prices and longer wait times for customers because the company prioritises diversity over hiring the most qualified workers.

Starbucks has denied the allegations, stating that its programs and benefits are open to everyone and lawful. The company maintains that its hiring practices are inclusive, fair, and competitive, designed to ensure the strongest candidate for every job.

This lawsuit is part of a broader pushback against DEI initiatives in the US, following President Donald Trump's executive order banning such programs in the federal government. The lawsuit reflects ongoing debates about the legality and effectiveness of diversity initiatives in the workplace. While some argue that these policies promote systemic discrimination, others see them as essential for creating a more inclusive and diverse workforce. The outcome of this case could have significant implications for how companies approach diversity and inclusion in the future.

Key Takeaways

ESG is continually becoming more and more prevalent in our world, demanding greater transparency and accountability from corporations worldwide. The stories highlighted this week paint a picture of both progress and setbacks. As Shell grapples with the repercussions of a corruption-plagued clean-up effort and Coca-Cola reconsiders its packaging strategy, the tension between environmental responsibility and economic pressures becomes apparent. Simultaneously, the challenges to DEI initiatives at Goldman Sachs and Starbucks signal a shifting legal and political environment for corporate diversity efforts. Ultimately, the Kobayashi Pharmaceutical scandal serves as a stark reminder of the potential financial consequences of neglecting product safety and consumer trust. For investors, these developments reinforce the need for thorough ESG due diligence and a critical assessment of companies' commitments to sustainable and ethical practices. Moving forward, companies that prioritise robust ESG frameworks will be best positioned to navigate the complex challenges and capitalise on the emerging opportunities in the market.

To stay up to date on the latest news in ESG be sure to sign up for our daily real-time news controversy alerts here, as well as follow us on LinkedIn for the latest updates.