Amanda Khatri
Editorial Manager
A new trend known as ‘greenhushing’ is on the rise as aggressive regulation and a sustainability backlash discourages firms from publicising their net-zero targets.
Regulators are increasingly concerned that organisations are not being truthful about their Environmental, Societal, and Governance (ESG) goals over fears they will be labelled greenwashers.
Whether failing to disclose properly, massaging figures, or hiding them entirely, the price of ducking reporting obligations may not be worth the trouble, experts say.
Organisations failing to comply with ESG reporting requirements such as the Corporate Sustainability Reporting Directive (CSRD) face fines of up to 10 million euros or 5% of their annual revenue.
In France, there is a potential for jail time of up to five years for any corporate director who fails to comply with CSRD and a fine of up to $81,400.
In the US, heavy fines have been levied against big household names including Goldman Sachs, BNY Mellon, and DWS by the US Securities and Exchange Commission (SEC) for misleading or exaggerated ESG claims.
This has further prompted firms to keep quiet about their ESG strategies.
Significant fines, combined with the public backlash, are prompting some firms to keep their heads down about ESG and sustainability goals to preserve their reputation.
What is behind the ESG backlash?
Much of the negative sentiment towards ESG stems from US political attitudes and has heightened as conservative political and business forces attempt to derail the sustainability push. Several (unsuccessful) bills have been floated, which has caused stress for firms operating across continents.
“There is a high degree of scrutiny now around anything to do with professing your sustainability, together with the ESG backlash, I think it’s scaring a lot of companies”, said Michael Wilkes, head of Imperial College London’s Centre for Climate Change and Investment.
Investment firm BlackRock became a political punchbag after its chief executive Larry Fink said “climate risk is investment risk” in a 2020 letter to CEOs, leading to BlackRock no longer using ESG terminology.
Amidst the tension, asset managers have faced numerous attacks by politicians over their ESG considerations, which has also led to funds avoiding the use of ESG terms.
The ESG backlash isn’t just a US issue, however, climate consultancy South Pole conducted a global survey of 1,400 sustainability executives across Sweden, Germany, the UK, the USA, France, Columbia, Switzerland, Singapore, Japan, and Australia and found 58% had decreased their communications on net zero targets because of greater regulation and scrutiny.
“People talk about greenwashing, but actually I think we’ve gone the other way and are greenhushing”, said Amanda Young, sustainability boss at Abrdn.
What is greenhushing?
Once considered a charitable effort to modernise financial services, ESG obligations are now mandatory for many organisations.
Climate change has inspired consumerism to focus more on sustainable brands, resulting in many firms claiming their products are sustainable or ESG friendly when they are not, more commonly known as greenwashing.
Greenhushing, on the other hand, was first mentioned in 2020 by consultancy Treehugger, which at the time believed cases were due to firms not wanting to share progress on ESG initiatives.
However, experts feel there may be other reasons for businesses not to fully disclose their sustainability goals or reporting.
“Is it genuinely that they’re too frightened to stick their head above the parapet?” There might be reasons not to; businesses might want more time to test solutions, maybe they’re not ready to show their hand yet and want to see if anyone else comes forward and gets tripped up by the information they share and they don’t want to make the same mistakes”, said Planet Tracker’s director of research John Willis.
Many companies may feel the pressure of public scrutiny and fear backlash if their ESG initiatives aren’t up to scratch. This fear could lead to greenhushing where they choose to remain silent about their efforts and avoid potential criticism.
Whilst he sympathises with smaller firms because collating ESG reporting data can be “overwhelming”, for bigger companies “it’s not really a data problem, it’s a priority problem” and “a lot don’t want to incur any cost for doing it”. This can lead to people “questioning the validity of your claims or the sustainability of your products”, Willis added.
South Pole also conducted a survey on 1,200 large corporations across 12 countries; all of which had net-zero targets. Of those surveyed, over two-thirds identify as “heavy emitters” and although the majority claim to have set science-based climate targets, 23 percent do not plan on publicising them.
This reluctance to disclose information is not uncommon, as evidenced by South Pole’s survey, some businesses may choose to hold back on sharing their environmental targets until they’re much more confident in their progress.
“This works both ways in that we want to avoid ‘green hushing’ as much as preventing greenwashing. This is where an investment underplays its sustainable credentials so as not to inadvertently overstep the mark. It is a phenomenon already seen in the US and it is vital that we do not see it creep into the UK”, said Gemma Woodward, head of responsible investment at Quilter Cheviot.
“If greenhushing becomes a trend, it will make inspiring some of the climate laggards even harder,” said Bethan Halls, sustainability adviser at South Pole.
She suggests that “as long as companies are transparent about their progress, and communicate that in a transparent way, then they can’t go wrong”.
CUBE comment
Being transparent about ESG goals can foster trust and value from customers.
To be completely transparent, firms need to understand their climate targets, what they mean, and how they can effectively reach them without practising greenwashing or greenhushing.
“The more rife greenhushing becomes, the more likely financial regulators are going to look at it and they could come down on big brands,” John Willis says. “So, the impetus to act is there.”
As with any type of misconduct, the more a type of misconduct happens, the more likely it will end up on the regulators’ priority list.
To ensure your business stays well ahead of any greenhushing and ESG regulatory updates, use CUBE’s Automated Regulatory Intelligence (ARI) to be proactive with compliance rather than reactive.