Skip to main content
Mar 14, 2023

Green-hushing: Will companies say less as ESG scrutiny increases?

Panelists discuss green-hushing at ESG Integration Forum in London

A common question for companies as they seek to tell their sustainability story is how much they should disclose.

For those at the beginning of tackling issues like climate risk or board diversity, it might seem risky to begin talking about those topics. Data that right now doesn’t look great could become a stick to beat the company with.

Generally, the advice for companies has been that it’s better to get going and start disclosing. An absence of information is usually taken as a bad sign and stakeholders will understand that it takes time to improve; they just want to know you have a plan and are making progress.

But amid the growing focus on greenwashing and the anti-ESG backlash, particularly in the US market, companies may be tempted to scale back their ESG reporting. This is referred to as ‘green-hushing’, where firms deliberately disclose less to avoid scrutiny.

Indeed, a survey of 1,200 private companies last year by South Pole, a carbon finance consultancy, finds that a quarter of respondents do not plan to discuss progress or goals on climate action beyond the bare minimum.

Green-hushing was one of the key themes discussed at the ESG Integration Forum, hosted earlier this month by IR Magazine and Corporate Secretary, where delegates chewed over the impact of growing scrutiny on ESG claims.

Greenwashing allegations are ‘perhaps pushing us into green-hushing,’ said Carla Stent, independent non-executive director and board chair at Marex Group, who took part in the opening panel discussion.

She said pressure on companies over their ESG disclosure is positive as it helps to improve reporting quality, but it’s a shame if they are ‘pushing some really good objectives further down and keeping them below the radar. We can all learn from each other through this.’

Disclosing less

Elly Irving, director of stewardship for sustainable investing at Lazard Asset Management, who spoke on a later panel about ESG data, said she was trying to get a sense of the trend. ‘We’ve gone through a phase of greenwashing and perhaps over-marketing or exaggerating some of the commitments,’ she said.

‘We seem to be entering this era now of increasing scrutiny and backlash around reporting from various different stakeholders. I do get a sense that perhaps corporates are going to start disclosing a bit less or stick more closely to the minimum requirements.’

Investors are increasingly holding companies to account on ESG issues through AGM votes, shareholder resolutions, tough engagement and even litigation, noted Irving.

Panel discusses ESG data
From left to right: Hemma Visavadia, IR Magazine; Jasmine Mehta, MSCI; Elly Irving, Lazard Asset Management; and Íñigo Olaizola, Iberdrola 

‘I’m a little bit worried about that level of scrutiny and whether there will [subsequently] be more green-hushing and a bit less transparency,’ she said. ‘Is that going to impact innovation in the reporting space? And what message does it send to companies operating in emerging markets where disclosure is very quickly catching up, but they’re at a different level? Or small and mid-cap companies?

‘If they’re seeing the leaders [in the space] being very innovative and very, very transparent in their sustainability reporting, and they’re being criticized and kind of shut down, what incentive is that creating? I’m very interested to see how things evolve in this space.’

Confidence issues

Speaking on the same panel, Jasmine Mehta, vice president of ESG and climate corporate sales at MSCI, said smaller companies are more likely to limit their disclosure.

‘We’re seeing some of the mid-cap and small-cap companies, and even private companies, being a little more sensitive regarding seeing what stakeholder expectations [are] and what the reactions could be to some of that information,’ she said.

MSCI has been putting information in the public domain, like its ESG ratings methodology and materiality matrix, to help issuers gain confidence in their reporting and better understand stakeholder expectations, added Mehta.

Íñigo Olaizola, head of planning, analysis and reporting of non-financial information at Iberdrola,  said the pressure on companies over ESG issues is only set to increase thanks to the various reporting initiatives under way.

‘We try to be as transparent as possible in order to comply with all the requirements we have,’ he said. But it’s hard to know what the future will look like, he added, given the work on new reporting rules taking place in Europe, the US and by the International Sustainability Standards Board.

‘They may seem parallel but, in the end, they are different,’ he pointed out. ‘If we are a company with a presence in different areas, we will need to fulfill all the requirements. Therefore, it’s going to be huge in terms of an increase in the resources to be put on the table by companies.’