Source: Unsplash

Leading brands risk losing out on billions of dollars due to greenhushing

Failure to communicate sustainability successes could be costing major companies substantially according to new findings from Brand Finance’s ‘Sustainability Perceptions Index’. Household brands including Microsoft, Sky, and Lidl could be missing out on billions in value simply because they are not communicating their sustainability credentials- known as greenhushing[i].

‘greenhushing’ refers to companies or organisations downplaying their environmental credentials. With the demands and backlash around ‘greenwashing’- where environmental claims are embellished or unsubstantiated, businesses may feel they are at risk of overstating their credentials or are uncertain as to how their business ranks amongst their peers. Thus, companies either downplay their achievements or fail to draw these out entirely, missing the opportunity to highlight their progress. Additionally, companies are driven by internal and external stakeholders; it may be felt that other features and areas of the business are in line for praise and promotion in reporting, leading to sustainability and environmental achievements being overlooked. Further, as we discussed previously some industries having a negative history relating to environmental impacts and practices, therefore companies operating within them today may feel unworthy, or unable, to speak out on their environmental achievements[ii].

Brand Finance, in quantifying the gap between sustainability performance and sustainability perception, has revealed the financial opportunity (and risks) for leading businesses. It found that where performance exceeds perception, there is opportunity for financial gain, the opposite is also true, with several companies displaying strong sustainability potential actually at financial risk due to failing sustainability performance.

Figure 1: Sustainability performance vs perceptions scores

Source: Brand Finance

As Figure one above shows, Sky, Lidl, and Microsoft have a high value growth opportunity, whilst Aramco and Tesla face significant risk to their value. In fact, Microsoft were found to have the highest positive gap value of any brand at $1.5 billion, showing that the company’s sustainability performance exceeds its sustainability perception and should enhance communication of its sustainability initiatives and services.

At the opposite end of the scale was Tesla, which will surprise many given its products centre around green technologies- for example electric vehicles. Brand Finance explain: “whilst Tesla performs well on environmental components of sustainability, it is weaker on governance and measures of social sustainability. In 2022, S&P removed Tesla from its ESG index, citing concerns over labour relations at its Freemont factory, its ‘codes of business conduct’, and its handling of an investigation by the National Highways Transportation Safety Administration. Tesla’s value at risk is $4.1 billion, more than any other brand in the table.”[iii]

Brands should be concerned- consumers want ESG assurance

The findings from Brand Finance should sound alarm bells for business leaders- it is not just the financial implications that greenhushing can have, consumers are also highly engaged with sustainability and eager to understand corporate green credentials.

As we reported earlier this year, a survey by Sensu Insight found that fewer than 1 in 4 UK consumers take ESG claims at face value. Yet the public want greater transparency- 9 out of 10 (89%) respondents said that they cared about the environmental stance of businesses and brands, and 86% wanted an increase in their level of transparency on environmental matters[iv]. Concerningly, just 8% agreed that most businesses currently do enough for the environment.

Failure to provide transparency and to address greenwashing concerns can be severely damaging for brands- Sensu’s survey found that well over half (59%) of consumers said they had changed their behaviour in some way because of perceived examples of greenwashing. The most common behaviour change was to reduce the amount of money spent with that organisation (23%), with 15% saying that they have boycotted a brand entirely as a result. Alternatively, whilst a company may not be greenwashing, by greenhushing, it may place itself at risk of attack on a perceived lack of ESG credentials.

References

[i] brand-finance-sustainability-gap-index-2023-full-report.pdf (brandirectory.com)

[ii] With new research finding that fewer than 1 in 4 UK consumers take ESG claims at face value, how can businesses address scepticism and get their message across? (zerocarbonacademy.com)

[iii] brand-finance-sustainability-gap-index-2023-full-report.pdf (brandirectory.com)

[iv] With new research finding that fewer than 1 in 4 UK consumers take ESG claims at face value, how can businesses address scepticism and get their message across? (zerocarbonacademy.com)