Businesses Are Struggling To Find The Right Balance On Sustainability Reporting, Mary Foley, Forbes.com, November 14, 2023
“Green is good” has been the big business mantra for a while now. However, the corporate love affair with the idea is currently being put to the test. It’s going to take a renewed focus on hard data and quantifiable metrics to get things back on track.
After a long courtship phase around all things sustainability and environmental, social and governance (ESG), where companies worked hard to burnish their sustainability credentials and portray the best versions of themselves in slick sustainability reports, advertisements and press releases, investors, customers and now regulators have stepped in and started questioning the veracity of some of these claims. In response, many companies have simply stopped talking about sustainability.
ESG Backlash Gets Real
According to one analysis, the number of mentions of the words “environmental, social and governance,” “ESG,” “diversity, equity and inclusion,” “DEI,” or “sustainability” on corporate earnings calls of U.S.-listed companies, declined 31% in April-June of 2023 versus the same period a year earlier. Likewise, asset managers have been increasingly dropping the word “sustainable” from the names of their funds. In the first half of 2023, 44 sustainable funds removed the label from their brand names. That’s in stark contrast from 2022 when 99 funds added the word “sustainable” to their titles.
At the center of this rise in so-called green hushing is the threat of investor backlash and growing government scrutiny over the accuracy of green claims, which have made it risky to even utter the word sustainability these days. In fact, a dozen of the biggest asset managers, private equity firms and brokers listed anti-ESG efforts as a risk in their annual reports, this year.
One can’t help but picture the C-suites of the world’s largest corporations deciding that discretion is the better part of valor and ducking back down below the parapet. However, that is not a particularly thoughtful business strategy and—in light of the rising tide of global regulation and legal actions focused on corporate sustainability reporting and greenwashing— it is not a viable long-term solution,