Data from RepRisk shows that one in every five cases of corporate risk incidents linked to environmental, social and governance (ESG) issues stems from greenwashing. It is an issue that every sustainability practitioner has had to grapple with and, as frameworks like the Competition and Markets Authority’s (CMA) Green Claims Code emerge, the number of corporates called out for false green claims may well grow.
To avoid greenwashing accusations, some brands and businesses may feel compelled not to communicate as much about their environmental plans, instead sitting quietly on the information they have – or don’t have – and going about progressing towards targets in silence. This practice is known as ‘greenhushing’.
Greenhushing gained traction when it was first covered consultancy Treehugger back in 2020, which at the time claimed that greenhushing would happen because businesses were hesitant to share progress on sustainability initiatives.
Reasons for doing so will vary; businesses may wish to avoid boycotts, increased staff turnover and reputational risk. But, as sustainability becomes more mainstream, the reasons behind greenhushing are changing. New research suggests that greenhushing can now be linked to businesses that are trying to falsely appear more sustainable, but are unable or unwilling to share the data and proof to fully back these claims.
While there are two sides to this greenhushing coin, the risks that corporates face for partaking in the activity – consciously or otherwise – remain consistent.
Indeed, a recent survey from Sensu Insight found that 86% of UK adults want to see more transparency from businesses on their environmental impacts, initiatives and targets. As such, greenhushing may be causing more harm than corporates realise.
‘Nowhere to hide’
Research published by South Pole last year revealed a trend towards greenhushing around corporate climate targets. Covering 1,200 large businesses with net-zero targets, that research found that one in four (26%) of the companies who had applied to the Science Based Targets Initiative had not published information about the new targets on their own websites or reports.
Corporates can list many reasons tp greenhush and not all of them are based on malicious intent to actively withhold information that could be perceived as damaging. Indeed, the South Pole survey indicates that some British firms are likely being held back by the policy landscape. Four in ten of the UK-based professionals surveyed said Government policy was the most important driver for setting and delivering a net-zero target, compared with three in ten globally.
This is one of the points raised by British American Tobacco’s (BAT) group head of ESG Edward Butt who has been overseeing the delivery of the firm’s Low-Carbon Transition Plan, detailing the actions it will need to take in order to create a net-zero value chain by 2050.
BAT does not hide from the fact that it operates within a controversial sector and is also not hiding behind that bold plan to reach net-zero emissions. Indeed, Butt believes that businesses will soon have “nowhere to hide” when it comes to communicating sustainability targets and the steps to reach them.
“Increasingly, there is nowhere to hide when it comes to the practice of avoiding fully or openly communicating sustainability targets,” Butt tells edie. “The majority of sustainability professionals work really hard to report well and transparently and to make tangible progress on their material issues. The advent of legal reporting requirements should help reduce the practice of greenhushing.
“This will increasingly mean organisations have to communicate externally – often with external assurance – on key sustainability matters and metrics applicable to their activities such as GHG emissions.”
Butt alludes to a selection of noteworthy legislative frameworks that have either just entered into force, or will do so shortly.
In the UK, certain businesses are now mandated to report in alignment with the Task Force on Climate-related Financial Disclosures (TCFD) requirements. The aim of the mandate is to increase climate-related engagement between investors and the companies they invest in. Until now, non-unified climate disclosures have made it challenging for investors to truly measure their exposure to climate risk. Another benefit is that, in measuring their climate impact, risks and opportunities, businesses may well be compelled to increase their environmental ambitions and accelerate actions. For businesses, this may come with operational cost savings and cost savings in terms of avoided risks.
More recently, the European Union’s Corporate Sustainability Reporting Directive (CSRD) floated the idea of “double materiality”, whereby organisations not only report the material impacts they have on environment and society, but also the material impacts of sustainability and accompanying requirements and regulations on that organisation. Then there are the draft proposals from the US Securities and Exchange Commission (SEC), and the UK Transition Plan Taskforce that, in the words of CDP, are “catalysing climate-related disclosures”.
In an era of heightened media coverage around sustainability and more green groups willing to call out cases of corporate greenwash, it can feel daunting to put a transition plan – essentially a company’s new regime for the next few decades – out into the public domain.
But while some corporates are waiting for regulation to give them a nudge towards greater transparency, the finance sector is beginning to take note of the risks of greenhushing, deliberate or otherwise.
Sophisticated greenwashing
Even as regulation on disclosure and transparency grows, there are some who argue that greenwashing is becoming more “sophisticated” as a result.
Earlier this month, Planet Tracker released a new report warning that greenwashing from companies has become a “many-headed beast”, with activities ranging from accidental inaccuracies within marketing, to singular green practices that distract from other damaging environmental policies.
One of the heads of this “greenwash hydra” was that of greenhushing. Planet Tracker’s director of research John Willis believes in some cases, business’s reasons for greenhushing have changed from a genuine fear of showcasing sustainability to a more deliberate attempt to withhold information and avoid scrutiny.
“Is it genuinely that they’re too frightened to stick their head above the parapet?” Willis asks when questioned why a firm may resort to greenhushing. “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. I accept all those as possible.
“But The Paris Agreement is now pretty old, now, it’s been around long enough, so how much longer is it reasonable for corporates to wait around for legislation? And, if there are good management processes in place, is it reasonable at all? The obvious answer here would be remove the ‘hushing’ bit from this and just be truthful about what you have and haven’t done. Most will find that investors are actually pretty accommodating about this now.”
Planet Tracker points towards the targets of major firms such as PepsiCo and Coca-Cola, stating that progress against recycling goals “deserves more scrutiny” and that “investors should have little confidence in these goals”.
One of the major reasons that corporates tend to stay quiet on progress is that they don’t feel they have the quality of data to back up claims, or even uncover action areas for decarbonisation. Data quality is commonly cited by investors as a reason for a lack of trust in corporate green claims and it is understandable that smaller sustainability teams will have trouble collecting data, especially if it relates to sprawling supply chains and Scope 3 emissions.
Chasing perfection
Many sustainability professionals work to the mantra of ‘not letting perfection be the enemy of progress’ and many large firms will at least have key data points on tier-one suppliers and operations.
But Willis argues that the data collection issue comes down to a lack of interest at the boardroom level, and that sustainability professionals can list the upcoming regulations and heightened risks of greenwashing and hushing to gain more buy-in for quality data collection.
“The more rife greenhushing becomes, the more likely financial regulators are going to look at it and they could come down on big brands,” Willis says. “So the impetus to act is there.
“I sympathise will smaller companies because the data aspect can be overwhelming, but for bigger companies, I’m sorry I have no sympathy that you feel unable to collect the data to disclose and report. It’s not really a data problem, it’s a priority problem. Brands have so much data on products and points of sale if they are a selling company, but when it comes to gathering sustainability data, a lot don’t want to incur any cost for doing it. What it means is that a company isn’t willing to put the resources into this.
“Well, if you’re not willing, then don’t be upset when people start questioning the validity of your claims or the sustainability of your products.”
With investors and stakeholders actively seeking better ESG data it is easy to understand why some companies may feel uneasy about sharing the lack of progress they feel they are making. Indeed, almost 30,000 large businesses, collectively worth around $25trn, did not answer CDP’s requests for information in 2022.
These firms may well be unprepared for the forthcoming uptick in disclosure requirements. But, as Willis mentions, most investors want to strike up a dialogue with sustainable businesses to enable them to showcase how continuous improvements can be made.
BAT’s Butt also acknowledges that there is no such thing as perfection when it comes to delivering on ambitious sustainability commitments, but that transparency can at least showcase how dedicated a corporate is to its long-term targets.
“There are substantial challenges and complexities posed by becoming a truly sustainable organisation,” Butt adds. “No one has all the answers, and we’re all on a sustainability journey together across organisations, governments and the whole wider civil society.
“What’s important is that we’re all as transparent as possible on where we are on that journey and on the challenges we face, while recognising that there is a balance to be struck between the sheer scale of work required to have ‘perfect’ reporting versus actually doing the work to make progress on the things being reported.
“At BAT, we strive to follow both mandatory and applicable reporting requirements, guidelines, frameworks and good practice, while recognising that there is a plethora of these for a global organisation and it’s quite a complex job. It’s really hard to be ‘perfect’ here, rather it’s about doing your best job each time, seeking to continually improve, and then taking on board feedback from stakeholder engagement, including constructive criticism.”