From greenwashing to greenhushing: Companies go quiet on ESG amid culture war boycotts

USA | What can it mean? Mentions of environmental, social and governance (ESG) issues during companies’ earnings calls have declined. Perhaps Bud Light’s partnership with trans influencer Dylan Mulvaney, which sparked boycotts and tanked the beer’s sales, served as a warning to other firms.

Last spring, the Washington Post newspaper reported recently, visitors to BlackRock’s website on sustainable investing saw an image of a building covered in green moss. In a caption, the world’s biggest asset manager boasted: “We are committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner.” Today, the webpage has been scrubbed of several references to the firm’s climate commitments.

BlackRock is not alone. According to the newspaper, AB-InBev has quietly stopped running Facebook ads that tout its goals of net-zero emissions by 2040, and 100 percent recycled packaging by 2025.

These are but two example of what some are calling “greenhushing”: companies keeping quiet about their sustainability goals, sometimes for fear of a public backlash.

The pendulum swings back

Ironically, it is BlackRock’s Chairman and CEO, Larry Fink, who had made himself the face of the ESG movement. Since 2016, he has been urging the chief executives of the companies in BlackRock’s portfolio (some 18,000) to consider their environmental and social impact, in order to improve their chances of long-term success.

But after vituperative attacks by Ron DeSantis, the Republican governor of Florida and other prominent Republicans politicians on Larry Fink and firms that spoke out on issues like climate change, LGBT rights and other subjects that they consider “woke”, BlackRock dropped the term “ESG”. As Mr Fink admitted in June, “it has become too politicised” by the Left and the Right. Nowadays BlackRock uses words like “sustainability” and “decarbonisation” instead.

Still, the conspiracy theory that Larry Fink is using his power to force his ESG agenda on vulnerable CEOs is very much ingrained in conservative minds. Early on in the Bud Light scandal, right-wing US media opined that Mr Fink was to be blamed for the brand’s woes, as he had bullied Anheuser-Busch into its “woke” marketing campaign.

The clampdown on greenwashing

On the face of it, greenhushing is the opposite of “greenwashing”. That term was coined nearly 40 years ago to describe the way companies exaggerate their environmental credentials in an attempt to market their products to environmentally conscious consumers. However, the two terms are interlinked.

There are good reasons for companies to tone down – or greenhush - their environmental claims. Who wants to be caught out at greenwashing? In Austria, Heineken’s unit Brau Union had to stop using claims like “CO2-neutral brewed” for its Gösser beer brand. A court had ruled in June, that fossil energy was only eliminated in the brewing process itself, not in the entire production process.

In Europe, regulators seek to crack down on greenwashing, after a website sweep in 2022 by the European Commission found that nearly half of the “green online claims” being made by companies were exaggerated, deceptive, or false. The European Commission now plans to require companies to substantiate assertions about their sustainability, including claims that their products are “climate neutral” or “containing recycled materials”.

While intended to prevent greenwashing, these rules could actually encourage even more greenhushing among US-headquartered companies that want to sell products in Europe, observers say.

Greenhushing: the data

In actual fact, greenhushing is a word that did not really exist a year ago. But the trend is undeniable, not least when it comes to social issues, one of the three pillars of ESG. 

According to data collected by the Wall Street Journal in June, US companies have significantly cut back their public comments on social issues. Mentions of social impact initiatives on earnings calls dropped almost 40 percent in the second quarter of this year, from their peak in the first quarter of 2021, although such mentions remain well above pre-pandemic levels.

Bloomberg found that references to LGBTQ “pride” in corporate public filings in the second quarter were down 39 percent from last year’s second quarter, although also still above pre-pandemic levels.

Chief financial officers, who often oversee sustainability and diversity efforts, are among the executives who have changed tack. CFOs at US-listed companies mentioned the topics on 93 calls from 1 April to 5 June, down 30 percent from the prior-year period, per the Washington Post.

Who are they afraid of?

They have probably done so, as opposition against the “weaponisation of capital” (aka ESG) has risen from well-funded right-wing organisations. These organisations have formed a powerful lobby, transmitting the message deep into Republican-governed states that ESG is wrecking social norms and dooming fossil-fuel production, on which many rely for jobs and tax revenue.

This year alone, the Economist said on 27 July, Republican lawmakers in 37 states have proposed at least 167 laws targeting ESG. Most have not passed. Republican-led Texas set a precedent, when in August 2022, BlackRock became the first American company to be put on a blacklist. This barred the state’s public institutions from investing money with asset managers that “boycotted” energy companies. Other states have followed Texas’ example.

Get out of politics

By going radio silent on their ESG targets, firms have laid themselves open to accusations of backpedalling. During Donald Trump’s presidency, corporate leaders turned into political CEOs, sticking their necks out on hot-button issues. They loudly embraced ESG-infused stakeholder capitalism, hoping to attract consumers and workers.

Then came the “wokelash”. Disney’s tug of war with Mr DeSantis over his “Don't Say Gay” bill in March 2022, which prohibits Florida teachers from discussing sexual and gender identity in some primary-school year groups, cost Disney’s CEO Mr Chapek his job. The affair marked a fork in the road. The lesson of the wokelash is that outspokenness can backfire, The Economist said.

Go green, go dark

It is understandable that by going silent, companies hope they will avoid political flak. But critics, like the Swiss consultancy South Pole, complain that greenhushing makes corporate sustainability targets harder to scrutinise, potentially leading to less ambitious targets being set, and missed opportunities for industries to collaborate.

However, there is little evidence yet of large companies backing off their sustainability commitments. For example, in 2021, AB-InBev signed a USD 10.1 billion ESG-linked loan. The facility has an initial five-year term and will cost more to service if the company falls short of its 2025 sustainability goals. One year later, Fernando Tennenbaum, CFO at AB-InBev told Fortune, a magazine: “Part of my compensation, part of my bonus is linked to ESG.” As AB-InBev’s case underlines, the ESG or sustainability agenda has been firmly embedded in corporate strategies.

No one knows if greenhushing will have the same staying power as greenwashing. Given the toxic culture wars, the threats of tarnished reputations and legal trouble, companies will have to make a calculated decision on what to share, how to share it and how much to share at each turn.