Greenhushing vs. “eco-spotlighting”: the critical need for localised ESG communications

As the political backlash to ESG grows, a reactionary trend is emerging: "greenhushing",  where companies deliberately underreport or conceal their ESG initiatives. We believe this is a reputationally damaging strategy. Companies should instead practise  “eco-spotlighting” - the communication of localised messages derived from a consistent, global ESG narrative that resonates with all stakeholders.

While it may seem benign, greenhushing reduces transparency, stifles progress on environmental and social concerns, and erodes trust among stakeholders. Companies must recognise that staying silent about their good deeds can severely damage their reputation and stakeholder relationships.

What drives firms to stay silent?

As early as January last year, Penta’s ‘What’s Next’ research highlighted greenhushing as the next frontier. This has been driven by several factors:

• Anti-ESG sentiment and regulation: In some political and economic circles, particularly in the United States, a growing backlash against ESG initiatives has emerged. Issues like climate change and social justice have become highly politicised, with critics accusing companies of prioritising social and environmental goals over shareholder returns. Several US states have introduced legislation aimed at curbing ESG investments. This hostile environment makes some companies wary of publicising their ESG activities for fear of regulatory repercussions or political backlash. Even if such anti-ESG sentiment is not shared in other parts of the world, such as in the EU, the global nature of business and communications means firms doing business in the US may be reluctant to talk about their efforts.
• Fear of greenwashing accusations: Growing public awareness of environmental issues has led to increased scepticism towards corporate claims of sustainability. The fear of being accused of greenwashing deters some firms from highlighting their legitimate ESG initiatives. By keeping quiet, they avoid the risk of reputational damage from potential discrepancies between their claims and actual practices. The rapidly changing nature of regulation adds to this fear. For example, in the EU funds industry, nearly 50% of sustainable funds shifted from SFDR Article 9 to Article 8 due to regulatory changes and uncertainty around definitions of sustainability. This widespread reporting on fund downgrades caused reputational damage.
• Competitive concerns: Some companies view their ESG strategies as a competitive advantage and prefer not to disclose much information to protect their unique selling propositions from being copied by competitors.

Penta’s policymaker research in the US makes clear that lawmakers are taking notice of this trend in the financial services space (Figure 1.) . At the same time, similar research in the EU shows that ESG remains a high-priority for policymakers and they want to see firms actively engaging on these issues (Figure 2).

Figure 1. US policy maker research 2023

Figure 2. EU policy maker research 2023

What’s the impact of greenhushing?

If firms keep silent on ESG activities but still engage in them, the impact can be significant:

• Reduced transparency: Withholding information about ESG efforts undermines a firm's reputation, stifling stakeholder trust. Investors, consumers, and employees rely on clear and accurate reporting to make informed decisions. When companies withhold information, it becomes difficult to assess their true commitment to sustainability and social responsibility.
• Stifled progress: By not talking openly about efforts, overall progress on environmental and social concerns may be dampened, as firms cannot share best practices and beneficial innovations may not occur.
• Erosion of trust: Consumers and investors may believe that a lack of communication signifies a lack of genuine commitment, which could decrease support for companies genuinely striving to make a positive impact and increase cynicism among the public and politicians.

The future of sustainability hinges on communication
The future of effective green communications hinges on open and localised messaging. We know from our policymaker research and understanding consumer sentiments across markets that what resonates with stakeholders in one region might not be as relevant in another. Consumer understanding and expectations around ESG can also differ. In some regions, consumers may actively seek out sustainable products and services, requiring more detailed information.

Ensuring localised messaging, built around central tenets, will show stakeholders that your company understands the specific concerns and priorities of the communities you operate in, leading to increased credibility, trust, and engagement. Firms may also need to adapt messaging depending on regulatory frameworks. The key is to understand the issues driving stakeholder groups, from regulators to customers, and adapt your messages accordingly. In other words, firms need to swap out greenhushing with what I call “eco-spotlighting.”

Eco-spotlighting

Crucial to eco-spotlighting success is building localised messages around a consistent, global ESG core narrative that resonates universally. This central message should be built around universal themes, with local teams empowered to tailor messages to specific market priorities and regulations.

For instance, let’s imagine a global investment bank operating in Germany and India. Its core ESG value is that ‘the firm is committed to driving positive environmental and social change through its investments.” In Germany, where investors increasingly concern themselves with climate risk, messages should focus on investment products focused on renewable energy infrastructure, energy efficiency companies, and sustainable bonds. In India, with a strong emphasis on social development and a large unbanked population, the same company should highlight investments in social infrastructure projects, poverty alleviation, and education, as well as the bank's role in providing financial products and services to underserved communities.

While this strategy requires careful coordination, it ensures all messaging, no matter the market, aligns with the core narrative, preventing contradictory messages and stakeholder confusion.

Firms that master this strategic blend of consistency and flexibility will have a competitive edge in brand and reputation, navigating diverse markets and stakeholder groups more effectively.

Ultimately, eco-spotlighting supports the creation of a more engaged, supportive, and resilient customer base, while ensuring a more transparent, positive, and future-focused global business environment. That’s worth talking about.