Greenhushing, Sustainability and Corporate Transparency

David Prieto

Transparency means owning the good and the bad of what a company is doing and has done.”

David Prieto

In today’s evolving business landscape, sustainability is - or should be - central to every corporate strategy. Pressure from consumers, investors, and policymakers drives companies to adopt net-zero targets, prioritize climate action, and increase transparency in their sustainability reporting.

Yet, as the momentum for corporate sustainability grows, so too does the complexity of navigating public perception, regulations, and internal processes. One phenomenon complicating this journey is "greenhushing"—the deliberate under-communication or withholding of sustainability achievements.

David Prieto, Vice President of Sustainability, Policy, and Advisory at ClimeCo, offers insights into the challenges and opportunities of navigating sustainability communications in this shifting landscape.

In this conversation, Prieto addresses the rise of greenhushing, its implications for corporate transparency, and how companies can find the right balance between communicating their climate efforts and mitigating potential risks.

Below is an unfiltered look into his thoughts on sustainability, greenhushing, and the future of climate communication.

Q:  Can you explain greenwashing, greenwishing and greenhushing? 

Sustainability initiatives among companies have grown tremendously in the past decade, yet a great deal of market confusion remains with an evolving voluntary landscape that has resulted in increased instances of greenwashing, greenwishing, and greenhushing.

Greenwashing – Where companies make false or misleading claims about the environmental benefits of their products, services, or overall business. These companies may inadvertently present themselves as more sustainable than they really are. Some companies may opt to spend more money on advertising green initiatives rather than implementing projects that result in tangible impact

Greenwishing – When aspirational environmental goals are set without concrete plans or means to achieve them. While the company may intend to meet its environmental goals, they are often overly ambitious and lack clarity. Stakeholders may unintentionally develop unrealistic expectations, leading to potential stakeholder backlash.

Greenhushing – When companies downplay or avoid publicizing their environmental goals, practices and/or achievements. A company may deliberately partake in this practice out of fear of criticism, accusations of greenwashing, and/or legal challenges.

Q: What are the main factors driving organizations to under-communicate their sustainability goals and efforts? How do regulatory uncertainties contribute to this trend?

Recent disagreements over terminology and measurement, as well as emerging backlash over ESG, have led to unintended consequences in environmental gains and positive momentum by forcing some organizations to retreat from promoting and/or announcing their sustainability initiatives and outcomes.

Various factors may drive companies to embrace greenhushing practices, including fear of scrutiny and criticism, regulatory uncertainty, stakeholder skepticism, outdated ESG programs, and incomplete data, to name a few. Greenhushing occurs because companies may face legal challenges and/or reputational damage if they fail to deliver on their environmental goals or if their efforts are perceived as insufficient or disingenuous.

The appeal of greenhushing is amplified when considering the ever-changing regulatory landscape. Ensuring compliance with claims is difficult as regulatory trends emerge and are replaced. The lack of clarity and varying global standards adds a layer of complexity. Taken together, these factors may lead organizations operating in this dynamic landscape to refrain from making environmental claims.

In reality, greenhushing prevents companies from emerging as leaders within their respective sectors. Stakeholders, such as customers and policymakers, are more likely to take a company seriously when it communicates its goals transparently and honestly. A robust sustainability strategy serves to facilitate this, bolstering resilience and responsiveness in the face of evolving operating conditions.

Q: What are the potential negative impacts of greenhushing on global climate action and industry progress towards sustainability?

The dangers of greenhushing are primarily threefold:

• Increased uncertainty and lack of trust among consumers and investors
• Reduced overall acceptance and adoption of sustainable business practices
• Abdication of leadership and lost reputational gains

At the most basic level, stakeholders can conflate a lack of communication with a lack of action. This perceived gap can signal an implied endorsement of inaction. Just as there can be a “me too” factor, there can also be a “me neither” response to current trends. This unintended and potentially compounding lack of urgency is especially daunting in light of the current climate crisis, which requires strong and swift action by all parties.

More pragmatically, the practice of greenhushing leads to reduced transparency and increased uncertainty, which, in turn, presents difficulties for stakeholders, primarily investors and consumers, who are attempting to assess a company's true environmental impact to make informed decisions. The lack of readily available and comparable information can hinder the efficient allocation of capital necessary for the energy transition. Failing to signal and disclose climate action reduces the perceived pressure on companies to improve their practices.

Collaboration and partnership enable stakeholders to share risk, which is hindered by greenhushing if sustainability efforts are not communicated. Actions taken by one company within an industry may inform the decisions and strategies employed by others. Withholding information on sustainability efforts ensures that best practices are not disseminated throughout the industry, slowing overall progress.

Globally, the prevalence of greenhushing significantly impedes accurate measurement and reporting of progress towards climate goals and sustainability targets. This will inadvertently affect the stringency of targets and regulations as countries work towards net zero by 2050.

Q: How does greenhushing affect the relationship between companies and their stakeholders, including customers, investors, and regulatory bodies?

Effective stakeholder communication enhances the operations and performance of companies. As such, the practice of companies intentionally not communicating their sustainability efforts and goals can have several negative impacts on their relationships with key stakeholders.

1. Customers – As customers increasingly expect businesses to be proactive about sustainability, greenhushing poses a significant risk to a company's credibility. The lack of communication and transparency can lead customers to question the company's genuine commitment to sustainable practices.
2. Investors – Greenhushing can significantly impede a company's ability to attract and raise capital in today's market. As sustainability metrics increasingly drive investment decisions, companies that fail to communicate clear sustainability strategies, actions, and targets risk increasing their cost of capital. Transparent and comprehensive sustainability reporting has become crucial for companies seeking to secure funding from sustainability-focused investors and funds.
3. Employees – Employees, particularly from younger generations, increasingly expect their employers to demonstrate strong environmental responsibility. Greenhushing can dramatically undermine employee morale, engagement, and a company's ability to attract and retain top talent.
4. Regulators – Greenhushing poses substantial challenges for regulators evaluating corporate climate action and sustainability claims. To discourage this practice, governments are increasingly evaluating stricter regulations and reporting requirements as a solution. Companies lacking regulatory readiness, robust data collection processes, and/or those withholding sustainability information face substantial risks. Without clear communication, these companies may struggle to demonstrate compliance, leading to heightened regulatory suspicion, more frequent audits, and potential penalties, legal consequences, or reputational damage.
5. Competitors – As sustainability increasingly becomes a core business metric in the market, companies that actively communicate their progress in their sustainability journey are gaining a competitive edge. Conversely, greenhushing may inadvertently provide an advantage to competitors who are transparent about their sustainability efforts, allowing them to capture a larger market share. By withholding information about their sustainability initiatives, companies may be ceding ground to their competitors and missing opportunities to build trust and credibility with customers, investors, and other stakeholders.

Q: What strategies can companies use to balance the need for transparency in their sustainability efforts with the risks of heightened scrutiny and regulatory repercussions?

There are several strategies a company can implement to market their environmental efforts and manage exposure to changing regulation:

1. Get an accurate baseline first – Too many companies jump into sustainability before they have all the facts. Beginning with a sustainability audit and benchmarking against their industry provides baseline data against which they can accurately measure – and communicate – progress.
2. Strengthen internal sustainability programs – Having an integrated sustainability program that can guide both climate action and the communication and reporting of that action will help avoid situations with unsubstantiated claims or overstated achievements. The program should have a robust internal review process for sustainability claims. This empowers companies to demonstrate their ability to meet their stated goals.
3. Present with accuracy and honesty – Claims should be measurable and backed with data, and progress should be tracked and reported. Companies must identify where emission reductions will come from and which scope of emissions the claim will be targeting. Any claims communicated should be honest and transparent, driving confidence in stakeholders. Transparency means owning the good AND the bad of what a company is doing and has done, so shortfalls should also be acknowledged.
4. Align communications strategy with actions – Smart organizations build communications on a strong foundation of materiality assessments and stakeholder engagement, demonstrating how sustainability plays an integral role in the corporate strategy. They also regularly communicate updates to show ongoing commitment, focusing on the material sustainability issues.
5. Establish regulatory intelligence/compliance, and scenario plan – Anticipate and engage with the government to ensure adequate preparation for evolving regulations and reporting standards. Companies relying on certain policy levers to achieve their goals may find themselves accused of greenwashing when regulations shift. Understanding regulatory trends will allow companies to better prepare and/or engage with their operating environment.
6. Engage and educate stakeholders – Work with segment stakeholders and develop an appropriate engagement strategy for each segment (e.g., investors, customers, employees, government, NGOs, etc.). Communications material and strategies may be tailored to specific stakeholders. For example, facilitating a targeted plant tour or workshop for policymakers can inform and/or influence emergent regulations. Similarly, educational material and resources on the company’s processes may be made available to the general public to align expectations with the company’s realities and challenges.

The strategies listed above serve as a broad depiction of steps that can be taken to reduce the risk of public scrutiny, while preserving the value garnered through environmental efforts. The key is to be thorough, transparent, and focused on demonstrating the reasonableness and effectiveness of your actions to minimize losses.

Q: How do emerging regulations and standards, such as the Green Claim Directive and SEC climate rules, influence companies' decisions to communicate or withhold information about their sustainability efforts?

As the regulatory landscape evolves, disclosure of material sustainability issues is shifting from voluntary to mandatory, significantly limiting companies' ability to willfully withhold or downplay their sustainability efforts. Regulations like the SEC's Climate Disclosure rules and the European Union's Corporate Sustainability Reporting Directive (CSRD) are mandating detailed reporting on greenhouse gas emissions, climate-related risks, transition planning, and other key sustainability metrics. The EU’s Green Claims Directive aims to address greenwashing and protect consumers and the environment by ensuring that environmental labels are reliable, comparable, and verifiable. The Directive sets conditions for substantiating and communicating environmental claims as well as set penalties for companies found to be noncompliant.

The expanded scope of these regulations, requiring granular, specific data has increased the pressure on companies to allocate the internal resources necessary to be compliant. Additionally, the regulatory environment presents potential legal liabilities relating to incomplete or misleading sustainability disclosures as well as poor sustainability performance. Consequently, companies are prioritizing transparent, accurate, and comprehensive communication of their sustainability initiatives, progress, and challenges.

To note, the regulation is constantly evolving and being litigated. The recent Supreme Court Decision on June 28, 2024, overruling the Chevron doctrine has universal implications on U.S. federal regulations, such as the SEC’s climate disclosure rules. As we are seeing with other climate action regulations, this may spur the introduction of similar legislation at the state level, further highlighting the need to remain up to date on emergent developments.

Q: What best practices can companies adopt to strengthen their internal sustainability programs and ensure they are prepared to communicate their sustainability achievements confidently and accurately?

Companies who are the most successful in this area are bought in at all levels of the organization, have created a culture of sustainability, and share the following attributes:

1. Internal governance and company-wide engagement – To strengthen responsible business practices, companies should establish a cross-functional sustainability committee with leadership representation to oversee policies and strategies. Ensuring executive-level support and accountability is crucial, while also engaging employees at all levels to build a culture of sustainability. Integrating ESG into strategic decision-making can embed sustainability into the core of the business and drive meaningful progress on goals.
2. Centralized and digitized sustainability data collection and reporting – To streamline data management and generate comprehensive sustainability reports, companies should leverage technology solutions that provide a centralized platform for collecting, analyzing, and reporting on sustainability metrics. Establishing robust internal controls for sustainability reporting is essential to ensure the accuracy, reliability, and consistency of the data, which is crucial for demonstrating transparency and building trust with stakeholders. Regular environmental audits and third-party verifications can help validate the information and enhance trust across the board.
3. Stakeholder engagement across the value chain to enhance transparency – Engaging with investors, customers, suppliers, and other stakeholders is crucial to understanding their sustainability priorities and concerns. By collaborating with these stakeholders, companies can establish accurate data-gathering processes, coordinate communication efforts, and maintain an active and open feedback loop. This collaborative approach not only helps address stakeholder needs but also fosters transparency and builds trust throughout the value chain.
4. Adoption of recognized reporting frameworks – To align reporting with recognized frameworks such as International Sustainability Standards Board (ISSB), European Sustainability Reporting Standards (ESRS), Taskforce for Climate-Related Disclosures (TCFD), Global Reporting Initiative (GRI), and others. These frameworks provide standardized metrics and guidelines, ensuring consistency, transparency, and comparability in sustainability reporting, as well as empirical and reliable analysis of efforts and progress against stated goals.

 Q: Why is it crucial for companies to maintain transparency and honesty in their climate communications, and how can this approach benefit them in the long run?

Honesty and transparency are absolutely crucial and beneficial for four key reasons:

1. Risk Management: Transparency around sustainability efforts enhances credibility, and mitigates reputational risks. By openly communicating climate-related risks and challenges, companies can better manage these issues and avoid potential damage to their reputation. Legitimate sustainability efforts and transparent progress reporting can ensure long-term resilience in the face of climate change, scrutiny, and other environmental challenges. As climate disclosure and sustainability reporting regulations evolve, transparent companies will be better positioned to comply and avoid penalties.
2. Improved stakeholder engagement: Transparent climate communications foster stronger stakeholder engagement, leading to valuable feedback, new ideas, and stronger relationships. This transparency also enhances employee engagement and retention, as employees are more motivated to work for a sustainable and transparent company. By prioritizing transparency and honesty, companies can build a strong brand reputation, foster customer loyalty, and attract investors, ultimately accessing capital more easily. In turn, a company’s voice and brand can carry more weight when engaging with policymakers on emergent standards and/or regulations.
3. Industry leadership: Leading companies with transparent climate communications can set industry standards, pushing others to follow and contribute to a broader shift towards sustainability. Prioritizing transparency allows these companies to differentiate themselves, establish leadership, and demonstrate a genuine commitment to environmental responsibility. This enhances reputation, attracts stakeholders, and drives progress on sustainability goals. As more companies embrace transparency, the collective impact on climate action and sustainable business practices will accelerate the transition to a low-carbon economy.
4. Meeting market expectations: Consumers and business partners have increasingly come to expect it, so those who fail to be forthcoming with environmental information do so at their own peril.

As companies navigate the complexities of modern sustainability, transparency and authenticity have become non-negotiable. The practice of greenhushing may seem like a shield against scrutiny, but it ultimately erodes trust and stalls progress toward sustainability goals. We'd like to thank David for sharing his insights with our team.