Getting Serious on ESG in Overseas Operations

Protesters demanding action following the devastating pollution caused by Formosa Ha Tinh Steel in Vietnam in 2016.

With major Taiwanese companies having received criticism for environmental and labor rights violations abroad, some analysts see signs of improvement, while others call for a more hands-on approach.   

On October 31, a group assembled at an industrial plant in Point Comfort, Texas, to protest an ongoing horror story. Led by activist Diane Wilson, representatives of the International Monitor Formosa Alliance (IMFA) began a hunger strike to demand action against the company after which their movement was named – Formosa Plastics Group (FPG).  

The demonstration was organized to highlight the devastating pollution caused by the Taiwan-headquartered company’s subsidiary, Formosa Ha Tinh Steel, in Vietnam in 2016 and the subsequent failure to adequately compensate the victims of the disaster.  

It was just the latest action in an unrelenting, five-decade campaign by Wilson, a fourth-generation shrimper whose high-profile protests include disrupting the FPG’s annual shareholders meeting in 2009.  

Across four coastal provinces in Vietnam, marine life and the fishing communities that depend on it have been ravaged by a flow of toxic gunk, spewed from a pipe connecting to Formosa Ha Tinh’s plant in the Vung Ang Economic Zone. Poisoned by chemicals, including cyanide, an estimated 70 tons of dead fish washed up on Vietnamese shores, with around 450 hectares of coral reef deemed severely contaminated.   

Formosa Ha Tinh admitted to the pollution in 2020 and agreed to a US$500 million settlement with the Vietnamese authorities. The affected communities reportedly saw little of that sum.   

“To this day, adequate compensation for victims is yet to be seen,” reads a statement from the IMFA, which advocates for fishermen, human rights, and the environment. The NGO was formed in 2022 by Wilson’s environmental group, San Antonio Bay Estuarine Waterkeeper.   

Plastic pellets discharged from the FPC, U.S.A. site documented by activist Diane Wilson and her team.

Earlier this fall at a September congressional briefing in Washington, D.C., Wilson described FPG’s malign influence on Point Comfort, Texas. Aside from polluting, the company bought up houses, land, and even the local elementary school, turning it into a training center, she said. As a result, most of the former population has left the city. “The very ground beneath Formosa is excessively contaminated with 13 of 14 priority pollutants and may never be cleaned up,” Wilson said. 

Over a four-year period, Wilson and her team collected more than 40 million nurdles – plastic pellets discharged from the FPG site – and thousands of photos documenting the pollution. The group’s efforts paid off in 2020 when the San Antonio Bay Estuarine Waterkeeper won a US$50 million payout – a record for a civil suit under the federal Clean Water Act – together with like-minded groups.  

Despite this, Wilson says that little has changed since the ruling, which included a “zero-discharge” stipulation. “Since [the ruling], Formosa has violated their permit 521 times and been fined [a further] $12.8 million,” she noted in her September deposition.  

In an emailed response to inquiries for this article, Mark A. Walker, a spokesperson from the corporate communications department of Formosa Plastics Corporation (FPC), U.S.A., wrote that the FPG subsidiary had “made great progress in reducing any pellets entering the environment,” while acknowledging that “our work is not done.”  

In a video provided by FPC, U.S.A, the company touts its strong ESG (environmental, social, and corporate governance) credentials, including strong support from the local community, “which drives our success to this day.” Ken Mounger, executive vice president of FPC, U.S.A, further informs the viewer that independent experts have “found no negative impacts” on Lavaca Bay, which adjoins the company’s complex in Point Comfort.  

Point Comfort, Texas, now has fewer than 800 residents and mostly consists of FPG facilities.

 Systemic issues 

The issue of litigious acts by franchisors abroad is not unique to FPG – other Taiwanese companies have recently made headlines for shortcomings in the “S” column of the ESG equation.    

In August, the Australian Federal Circuit Court issued a landmark ruling against the Australian franchisor of Taiwanese company Chatime, the world’s largest teahouse franchise. Legal action over wage underpayment was initiated in 2019 by the federal Fair Work Ombudsman, which alleges that the bubble tea giant underpaid employees by a total of at least AU$169,000 (around US$112,000). Another Taiwanese beverage chain, 85ºC Coffee, faced a similar lawsuit in February.  

According to Adele Ferguson, an award-winning journalist who has exposed these and other labor-rights scandals, Australia’s system has for far too long targeted franchisees while allowing the head office to plead ignorance of violations. In 2017, amendments to Australia’s Fair Work Act created provisions for actions against responsible franchisors. Yet Ferguson says there is still a reluctance to use the full force of the law. 

“Rather than go in for the kill, it’s about compliance,” she says. “The chances of getting caught are so minimal and the fines so low that a lot of companies just take the risk.” She further argues that parent companies should take more responsibility for their foreign subsidiaries’ actions since they receive shares of their earnings.  

Domestically, environmental activists have also criticized loopholes in Taiwan’s disclosure regulations that enable parent companies to airbrush their ESG records.  

“The system is not working,” says Sun Hsin-hsuan, a researcher and campaigner with the Environment Rights Foundation, which is suing FPG in Taiwanese courts on behalf of Vietnamese plaintiffs. She notes that regulations introduced by the Taiwan Stock Exchange (TWSE) in 2021 mandate ESG disclosure for listed companies of a certain size and within certain industries. “But they’re not required to disclose everything that’s happened in subsidiaries and supply chains.”  

Such a system subsequently encourages companies to offload social costs onto foreign countries, from where malfeasance – even when prosecuted – won’t attract the attention of investors. “They can be performing perfectly in the parent company in Taiwan and have this excellent report, but nothing about operations abroad,” says Sun. “Under the current system, that’s not illegal.”    

Some observers believe that the social components of ESG are frequently overlooked by Taiwanese companies because of outmoded mindsets on working conditions and a relative lack of visibility compared to environmental issues.   

“Many adopt ESG measures merely for appearance, with a significant majority neglecting the social and governance aspects,” says Charlie Chao, executive director of York Business Interiors, which focuses on ESG solutions as an authorized dealer for office furniture company Herman Miller. “If you go to Google or Meta’s offices in Taipei, they focus on the social part – providing a good workspace,” says Chao. “Most Taiwanese companies don’t do that.”  

There is also a lack of appreciation of the mutually reinforcing interplay between “E” and “S,” says Chao. “A big chunk of the environmental is electricity and how the building is built,” he says. “But how people are using space, and trafficking and recycling doesn’t really count.” Companies generally purchase low-cost furniture, neglecting issues of retention, recycling, or how long it takes to fully dispose of items, which are “all part of the footprint.”   

While Chao assists local companies with transitioning to sustainability, he says it can be tough convincing clients of the benefits of pricier products. “What I’m selling probably lasts 30 years and, after that, can be decomposed, recycled, then reused for another 20 to 30 years,” he says. “But many people don’t want that initial cost and think that, long-term, it won’t be their call anyway.”  

Nevertheless, there are signs of improvement, according to some professionals with ESG know-how. “While still below environmental concerns, labor rights and social welfare are increasingly important,” says Charles Chin, CEO of WritePath, which provides hybrid AI and human translation services for companies requiring English-language data disclosure, including ESG reporting. Chin gives an example of a client with a factory in India where there have been labor protests. “Because there was criticism from outside, they had to give it attention in their annual report,” he says.  

Navigating the alphabet soup of international ESG standards is a further challenge for Taiwanese companies. “There are too many different standards, and they change,” says Alex Lee, founder and CEO of Quantum International, a capital-market advisor that incorporates ESG into its solutions. “It can be hard for companies to keep track of all the different requirements.”  

Sun agrees, calling the system “fragmented,” while Chin notes that overlap from competing bodies can make it tough to establish exactly which standards should be emphasized, depending on the kind of investment a company has or hopes to attract. There is also an ever-evolving updated glossary, says Chin, which requires his team to keep abreast of the latest terminology.  

Given the need to tick all the right boxes, is ESG disclosure not in danger of becoming an exercise in “greenwashing” – a criticism Sun and fellow activists frequently level? “Maybe,” says Chin. “But it’s better to have greenwashing than nothing.”  

Despite these challenges, industry analysts agree that the globalized nature of supply chains means ESG can no longer be ignored. “Previously, a company’s future was represented by CapEx or R&D,” says Lee. “Now, ESG equals the future, and any company not committing to that will fail.” 

To harness these trends, domestic companies may have to adopt a hands-on approach to ESG with their foreign partners, argues Elisa Chiu, founder of Anchor Taiwan, a venture capital and ecosystem-building platform. 

“Taiwanese companies should and could take a more active role instead of passively meeting requests from international brands,” she says. Chiu gives the example of a 2021 collaboration between Taiwanese textile conglomerate Far Eastern New Century and Canadian apparel multinational Lululemon to produce a fabric made from recycled carbon emissions.  

“Many Taiwanese corporates are sitting on tremendous amounts of cash,” she says. “What if they combined corporate venturing and strategic investing with ESG solutions to be part of the global conversations?” 

Chatime and 85ºC Coffee did not respond to requests for comment for this article.