Greenhushing: How will it impact sustainability efforts in financial services?

Be the first to comment

Greenhushing: How will it impact sustainability efforts in financial services?


This content is contributed or sourced from third parties but has been subject to Finextra editorial review.

We have all heard of greenwashing – when companies lie or exaggerate their sustainable efforts to gain ESG brownie points and falsely reassure customers of their dedication to the environment, there is a new term that companies are getting the hots for called greenhushing.

This terrible name for an even worse activity is when companies simply will not be transparent with their sustainability efforts, initiatives, goals, and progress.

Speaking to Emma Kisby, CEO of Cogo, EMEA, she elaborates on the concept:

“The last couple of years have focused a lot on greenwashing. Greenhushing, however, is essentially when a company doesn't communicate, or it goes very quiet, around anything they are doing from a sustainability perspective - whether that's their climate goals, targets, initiatives, or more.”

Kisby explains the reasoning for what seem counterintuitive: “They're not disclosing those because there's a fear of the company being called out. That alone is the opposite of greenwashing, it's greenhushing, where companies are intentionally staying silent on sustainability for fear of rebuke.”

This is an overall unwise route for businesses to take, especially in such a heavily regulated industry as fintech where sustainability is steadily becoming a key issue and a tenet to every initiative.

A 2022 South Pole survey found incriminating data of the sheer number of companies that participate in greenhushing – 1 in 4 companies do not plan to publicise climate targets. Kisby says that nearly half of small businesses don’t have a sustainability strategy and fear facing failure if they are not doing what is needed.

Finance executives love to push transparency as something that they prioritise, yet greenhushing is supposedly the exact opposite of that, the same way greenwashing the practice of lying outright. It is objectively unethical to be lying about sustainable efforts for fear of backlash.

An array of financial institutions, such as HSBC and Deutsche Bank, as well as popular retailers such as H&M, Nike, Allbirds, and Canada Goose that were sued for greenwashing campaigns and pushed the EU to ban misleading environmental advertising. However, greenhushing is also a consequence to heavy regulation; according to RepRisk data, there was a 70% increase in the amount of climate-related greenwashing incidents from 2022-2023 in the banking and financial services sectors, the study reported that companies that engaged in greenwashing also participated in social-washing.

In March this year, investment firms BlackRock and Vanguard removed 2050 net zero goals and sustainable commitments from their websites, leading to widespread uproar from climate activists. BlackRock CEO Larry Fink stated in 2023: “I don't use the word ESG any more, because it's been entirely weaponised ... by the far left and weaponised by the far right."

For executives that spew out nonsense such as this, there is no use in being angry about receiving backlash from activists. At the end of the day, activism is a format that your consumers use to express their dissatisfaction and demand change. The negative responses that major companies see from climate protestors, governments, and regulators is a direct consequence of how they act. The way to stop protests, criticism, controversy, and all these other things that clearly rub corporate chiefs the wrong way (it is what they are intended to do) is to stop engaging in misleading sustainable practices. 

Communication is another buzzword that is always being theoretically placed “at the core” of financial institutions, whereas greenhushing also goes against that concept.

It is incredibly important in the sustainable finance sector is to supply the data needed for regulators and businesses to guide their sustainable development goals, and to give consumers a point of understanding of where their money is going and what values their banks hold.

Could ‘greenhushing’ be a good thing?

In 2023 ABN Amro removed the word “sustainable” from funds and initiatives while waiting for further clarification from European regulators. This move, waiting for a more detailed and secure definition of what ESG and sustainability actually means does make sense, rather than throwing around words and phrases with no significance whatsoever.

It could be considered, amid the upset of climate criticism that businesses face, that they prefer not to disclose sustainable efforts so that they may continue them on their own, without being rebuked  for not having the right approach.

However, the likelihood of businesses keeping their sustainability efforts hush-hush just to continue to act ethically and sustainably without critique seems like a stretch to me. Companies need to be honest and transparent about their operations, consumers cannot be expected to simply trust in their efforts. As a whole, no one company is ‘doing sustainability’ perfectly.

The issue seems to be more of a visibility problem for these companies than actual criticism on their operations, and what they are more worried about is backlash rather than their impact, which tells the consumer all they really need to know.

It is an ongoing process, where regulators, business leaders, and consumers are learning as we go. The more data is accumulated, the more impactful future action will be.

“When you stop people from talking about initiatives or opportunities it also halts debate. There's no visibility. A lot of the evolution that we see in this space comes from vision and inspiration. When companies don't share what they're doing to support sustainability goals and targets, then they can't inspire others to move faster, and therefore that collective action stalls,” explains Kisby.

Is further regulation the answer?

A simple solution for greenhushing would be regulation – comply with ESG regulation and be transparent about carbon emissions and sustainable initiatives, or face regulatory barriers and fines. However, regulation is only one solution to a symptom of a larger issue. It is imperative that financial institutions place visibility and accurate sustainable reporting at the forefront of their green initiatives to bolster the sector in engaging with the sustainable transition.

Kisby states that regulation is not the solution, but it’s about how companies communicate. Businesses need to be straightforward about what they do and don’t know during the transitions and engage in open conversations to better improve the space.

Sustainability has been an issue for decades, but is still a relatively new concept in terms of implementation, therefore companies need to be honest about both successes and failures in their sustainability efforts to allow collaboration in the sector, the opportunity for businesses to support each other in their sustainable journeys, and for sustainable-focused organisations step in and help companies with their needs to ramp up their sustainable strategies.

Kisby concludes: “I'm a passionate believer in the role of data in supporting sustainable action in terms of both the measurement and the transparency that they can deliver. There is a lot of criticism around not having perfect data, that holds up people and stall action, but there is no such thing as perfect data. Some of the regulations around reporting, disclosing, and having a consistent data point will at least create a starting point, but from there we need the confidence of individuals and leaders, of shareholders, and investors to start taking action faster, and be more open and honest about what's working and what's not working.”

Overall, greenhushing will not last in the long-term because consumers are demanding conscious consumption. The majority of consumers, especially amongst the younger generation, are seeking to invest in financial companies that match their values, specifically when it comes to sustainable issues like carbon emissions, clean energy, and environmental impact. It is not in a business’ favour to act as if their green impact does not matter or affect them, and then to go the extra mile to cover up their sustainability movements. The simple act of addressing the issue, if the effort is fully-formed or not, will make a difference to regulators, consumers, and the sector as a whole.


Comments: (0)


This content is contributed or sourced from third parties but has been subject to Finextra editorial review.