New report asserts that businesses that aren't transparent on their ESG progress, for fear of greenwashing, are missing opportunities for investment and gaining credibility with consumers.
New research finds that almost six in ten (58 percent) of the US’s 100 largest
public and private companies are responding to greenwashing concerns by keeping
quiet on genuine ESG progress.
With global ESG assets surpassing $30 trillion in 2022, and Bloomberg
reporting 85 percent of investors believe ESG assets lead to better
returns
— an assertion also supported by recent studies by
Kroll
and Kyushu
University
— companies that remain quiet on their sustainability progress may be missing
out on opportunities for potential investment and connecting with
consumers.
This finding was also echoed by Brand Finance’s latest Sustainability
Perceptions
Index
— which found that the world’s biggest brands are missing out on billions of
dollars of potential value by failing to properly communicate their
sustainability achievements and progress.
The Transparency Index 2024 —
published by data-insights company Connected
Impact
and data-science consultancy Ringer
Sciences
— reviewed over 600,000 external communications from 200 companies to identify
the “transparency gaps” between what businesses communicate on social media
about ESG topics and what they factually disclose about their targets and
performance in annual reports, websites and other corporate documents.
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The findings reveal that only 2 percent of US companies “over-promoted” — or
greenwashed
— their ESG progress, with 58 percent taking the opposite route and
“under-promoting” and -disclosing more factual data on ESG. In a climate of
increasing regulatory and consumer
scrutiny,
where mistakes can result in fines and reputational damage, companies seem to be
hesitant to promote their legitimate sustainability-related credentials due to
fears of greenwashing
accusations.
This puts them at risk of
“greenhushing”
— when organizations choose not to publicize details of their environmental and
social targets, or their plan to reach their targets, to avoid scrutiny and
allegations of greenwashing.
“Businesses are under increasing pressure to avoid greenwashing — with
increasing regulations and potential fines for those who misrepresent their
legitimate ESG efforts,” said Connected Impact CEO Dr. Lucy
Walton. “But businesses must
also take action to avoid
‘greenhushing’.
Our data reveal that businesses are more likely to under-promote than
over-promote their ESG initiatives. This cautious approach can deter investment
and undermine credibility.”
Only four in ten (40 percent) of companies offered a “balanced” picture, with a
minimal transparency gap — which the report suggests makes companies more
trustworthy than their peers.
Methodology
The Transparency Index 2024 reviewed over 600,000 organic LinkedIn and
Twitter (X) posts as a proxy for external communications from the FTSE
100 and the 100 largest public and private US companies using publicly available
revenue data.
Connected Impact’s patent-pending methodologies were then used to analyze
sampled data. Transparency was calculated by quantifying the balance and
alignment between communications and disclosures. A transparency gap is defined
as the quantified difference between a company’s factual disclosures on a
particular topic and the company’s commentary or communication on the same
topic. Transparent communication proportionately aligns the quantity and quality
of qualitative content on a topic, with detailed and evidenced quantitative
disclosure on the same topic.
The report examined emissions, ethics, diversity and inclusion topics to
represent E, S and G criteria. Emission disclosures had the largest gap — with
67 percent of companies disclosing more on emissions than they communicated —
while governance had the smallest gap, with 40 percent of companies having a gap
between their ethics discloses and communications.
“ESG transparency is currently a missed opportunity for the top 200 businesses
in the UK and US,” Walton added. “We know most consumers favor responsible
brands and transparent businesses. We know a well-governed, transparent business
attracts more investment and top
talent.
This report equips businesses to identify — and close — transparency gaps; so we
can all make better decisions about where to invest our money, time and
attention.”
Fear not
Along with the rise in scrutiny and pressure on companies to increase
transparency around their social and environmental performance, a growing number
of tools and resources have emerged to help them meet the moment — including
AI-based platforms such as
Greenifs
and lower-fi options such as Creatives for Climate’s new Anti-Greenwash
Guide
for ad and communications agencies.
Published Jul 11, 2024 8am EDT / 5am PDT / 1pm BST / 2pm CEST
Sustainable Brands Staff
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