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ESG: The pressure of NGOs on companies


ESG: The pressure of NGOs on companies

At least since the Fridays for Future demonstrations took place, it seems society is placing increasing importance on the protection of environment, human rights and social justice –fundamental ESG issues. A golden era for NGOs? After all, they’ve been campaigning on these issues for decades – which makes them dangerous for companies as well.

ESG Banner-The pressure of NGOs on companies

NGOs have become ESG veterans
Non-governmental organizations (NGOs) are initiatives, associations or organizations that operate independently of governments and businesses. They can be active on a national or global level and, depending on their orientation, work for a specific social, ecological or humanitarian overarching theme – without wanting to make a profit from it. They uncover for example government or corporate scandals through their work, and generate public pressure with their revelations and actions. The consequence for companies: damage to their image, which should prompt them to change their business practices as quickly as possible.

Many NGOs have been active in their field for decades. Greenpeace, for example, has been campaigning internationally for environmental protection since the 1970s. They achieved a major success in the 1990s when the oil platform Brent Spar was not sunk by Royal Dutch Shell on the high seas as planned, but was demolished on land.

Currently, the Chinese region of Xinjiang is attracting attention. According to media reports, the Chinese regime persecutes the Uyghurs living in Xinjiang, many of whom are Muslim, puts them into forced labor or imprisons them without reason. In this context, nearly 180 NGOs have been already appealing since last summer to major fashion or furniture companies such as H&M and IKEA to stop buying cotton that was harvested with the help of Uyghur forced laborers – until now, the companies have been unable to remove this cotton from their shelves. NGOs still urge the companies to buy cotton from other countries and to cut their supply chains to Xinjiang.

Companies cannot withstand the pressure
The example of the SeaWorld theme parks in the USA also shows how great the influence of NGOs on companies can be. For years, animal protection organizations have criticized the captivity and breeding of orcas in general and specifically at SeaWorld. Shows with the large animals were considered as the main attraction of the theme parks for years. In 2013, the documentary Blackfish, directed by Gabriela Cowperthwaite, was released, drawing attention to the dangerous consequences of this form of animal use. Animal welfare organizations then called for a boycott and were successful: visitor numbers to the theme parks dropped extremely. In 2017, SeaWorld finally officially announced that it would stop breeding orcas.

It is true that NGOs are subject to criticism from time to time, as some of them are financed not only by donations but also by government funds, which raises doubts about their independence. Nevertheless, NGOs still enjoy a high reputation in society and can put great pressure on companies by reporting on scandals and making them widely known. Given the looming reputational and business risks companies face when attacked by NGOs, it really is worth to identify such risks in advance and to push continuous development of ESG control measures. After all, for example, a company that is verifiably in control of human rights compliance in its own supply chain, has significantly less to fear from NGOs since it offers fewer opportunities for attack.

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