What Did We Learn About ESG Engagement in 2024?

Environmental, Social, and Governance (ESG) is increasingly becoming a great concern for investors, corporations, and regulators globally. As businesses cope with the ever-growing ESG landscape, ESG engagement has been a big determinant of the formulation of corporate policies, investor actions, and trust-building among stakeholders in the long-term. As the new year approaches, companies face new challenges from regulators, tech innovation, and changing stakeholder expectations. In light of this, our blog summarizes key findings from Inrate’s 2024 Engagement Report to apply learnings from the past year to inform engagement efforts in 2025.

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. Key stakeholders—such as employees, customers, and communities—also play a role in shaping and implementing policies to mitigate ESG risks.

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 –

The 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. In many cases, Scope 3 accounts for the largest portion of an organization’s carbon footprint, significantly exceeding Scope 1 and Scope 2 emissions.

• Scope 3 is critical to achieving the Paris Agreement’s climate goals because it accounts 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.

• Engagement on Scope 3 emissions has increased with 24 companies recently engaged and having implemented at least some Scope 3 reduction policies. However, some still lack Scope 3 reduction targets.
• The percentage of companies that received at least some form of independent verification of their Scope 3 emissions and reductions increased from 50% to 67% in 2023.
• Lesser-known companies face more challenges because there is less data available, and Scope 3 accounting is too complex. Many are opting to report infrequently but accurately, rather than revising their methodology more often.
• Striking the right balance between improving disclosure and ensuring the reliability of the provided data has proven to be a challenging area of focus for future corporate engagements.

Read more: Difference Between ESG and Impact Investing 

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. Key strategies include using recycled materials and improving recyclability, although regulatory constraints, such as those in pharmaceuticals, can limit flexibility in packaging design.

• Sustainable Products and Services was regarded as a significant business issue by nine out of 10 companies.
• Beyond environmentally conscious customers, it also presents opportunities for market expansion and cost-cutting for businesses.
• Research shows that, beyond long-term sustainability, they also enhance trust from customers, ensure compliance with regulations, and minimize financial risks.

• Almost all companies regarded this as a material issue, and most of them met their milestones for devising policies and programs in this regard. 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 the increasing integration of sustainability considerations in operations, challenges remain in reporting of KPIs due to a lack of tracking and assessing sustainability-related performance indicators. Moreover, there are persistent gaps in defining sustainability objectives and measuring outcomes.

Figure 1: Topics Engaged 2024

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.

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. Biodiversity loss disrupts supply chain stability and increases costs for raw materials, creating both financial and operational risks. Industries such as food, materials (including mining), and energy are particularly vulnerable to biodiversity risks and impacts.

• 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.

Read more: Biodiversity: The Hidden Threat to Investors

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. In Switzerland, 59% of companies (in the Inrate universe) have human rights policies, but only 27% of those companies implement these policies in practice.

Human right due diligence plays a critical role in reducing reputation damage, legal fines, and other financial repercussions. Moreover, it ensures that the interests of both shareholder and stakeholder are balanced.

• Companies tend to score well in the first step of the human rights due diligence management system, but fewer companies 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.
• Human rights risks and impacts will vary based on the industry and countries of operation, and companies need to thoroughly understand the nuanced ways in which this topic applies to their activities.

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. Social risks, such as bullying, harassment, and violence, also play a role. Initially focused on presenteeism, the scope expanded in 2020 to address mental health more holistically.

• 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 having to take sick leave due to mental health issues leads to a GDP loss for Switzerland of around CHF 17.3 billion per year.

• Awareness of the issue is growing among certain companies, but none of them publicly disclose how presenteeism is being addressed internally.

• There are programs aimed at employee retention and engagement, but greater disclosure is needed regarding the issue of workplace bullying and harassment.

Read more: Inrate’s Engagement Services

Figure 2: Historical Development Topics Engaged (Environment & Social)

Investors influence corporate governance by electing the Board of Directors, making board composition and competencies crucial. Beyond independence and gender diversity, investors seek boards with skilled and experienced members. Inrate identifies 10 key competencies to assess boards and uncover potential skill gaps.

• The board approves and supervises the company’s strategy, as well as its long-term objectives.
• It plays a decisive role in the direction of a company’s actions in terms of its risk profile, competitiveness, business activities, and impact on the environment and society.

• The board competencies score dropped significantly after Inrate added ‘Sustainability’ as a required board-level competency. Since most companies lack this expertise, the average topic score has declined. Only 13% of Swiss board members have all the required competencies.
• Interestingly, female board members exhibit the highest sustainability and digitalization competencies but have the least CEO and industry experience.
• More and more annual reports are systematically disclosing the board’s competencies and skills in a matrix format.

The use of ESG indicators for executive bonus payouts promotes positive ESG corporate behaviour. Integrating ESG criteria into bonus structures can drive sustainability within companies. For effectiveness, ESG targets must be relevant, measurable, transparent, and clearly aligned with corporate strategy.

• It encourages business sustainability and has a bearing on the governance and finances of the company.
• It helps achieve compliance with social and environmental objectives (for example, the Paris Climate Agreement).

• 58% of firms now use ESGs as part of their remuneration package (compared to 17% in 2019). 95% of Swiss Market Index (SMI) constituents fulfil the ESG remuneration requirements.
• There is increasing ESG litigation in Europe, which is producing clear accountability and responsibility for companies.
• Inrate introduced a new distinction for the 2024 annual general meetings (AGM) season, ensuring that ESG goals in compensation reports are concrete, measurable, and relevant, thereby improving reporting quality and ensuring significant contributions to sustainable development.

Read more: Inrate’s ESG Engagement Strategy

Figure 3: Total Score Distribution 2024

Inrate’s zRating model evaluates corporate governance across 68 weighted criteria. The criteria are divided into five categories. The list of criteria is based on the principles of proper corporate governance, legal principles, and self-regulatory instruments.

Corporate Governance quality influences long-term corporate value, shareholder rights, and ESG impact. Poor governance can hamper financial performance, transparency, and risk management.

• 41% of Swiss companies now include sustainable value creation in their statutes, a significant jump since 2021.

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.

In 2025, Inrate will expand its engagement offerings with the launch of the Real Estate Funds Engagement initiative, targeting sustainability improvements in Swiss-listed real estate funds. Additionally, the new online platform, introduced in 2024, will continue to enhance transparency and streamline reporting, ensuring stakeholders can efficiently monitor engagement progress.